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WHY WAR 



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WHY WAR 



BY / 

FREDERIC C. HOWE, Ph.D., LL.D. 

COMMIS8IONEB OP IMMIGRATION AT THE PORT OF NEW YORK 

AUTHOR OF "SOCIALIZED GERMANY," "EUROPEAN CITIES AT WORK," " THE MODERN 
CITY AND ITS PROBLEMS," "PRIVILEGE AND DEMOCRACY IN AMERICA," ETC. 



NEW YORK 
CHARLES SCRIBNER'S SONS 

1916 

A 

1 






O 



COPYBIGHT, 1916, BT 

CHARLES SCRIBNER'S SONS 



• 



Published April, 1916 




APR 13 1916 

©CLA427667 C/ 



TO 
PRESIDENT WOODROW WILSON 

WHOSE SYMPATHIES FOR 

WEAKER KATION8 AND RECOGNITION OF THE RIGHTS OF STRUGGLING 

PEOPLES HATE SHIELDED MEXICO AND 

CHINA AND SAVED US FROM THE CONSEQUENCE8 OF 

FINANCIAL IMPERIALISM 

THIS BOOK 

IS GRATEFULLT DEDICATED 



PREFACE 

Modern war is the result of a combination of 
explosives much as a thunder-storm is the result of 
a combination of unusual atmospheric conditions. 
The spark may be ignited in Berlin, Petrograd, 
Vienna, or London, but the explosive combination 
is likely to be found in obscure portions of the world. 

The cause of the present European war is not to 
be discovered in the White Book, the Yellow Book, 
or the Orange Book; the war did not originate in 
the capitals of Europe, even though the first overt 
acts were there committed. The war is not the re- 
sult of patriotic uprisings on the part of the people, 
of the overcrowding of population, of any social 
unrest at home, or a national desire for overseas 
markets. The war is not the personal war of any 
ruler as were the wars of Frederick the Great or 
Napoleon, as were the wars of Bismarck fifty years 
ago. In its final causes it is not a war of aggres- 
sion or defense, as were the recent wars of Ger- 
many, Austria, Italy, and France. When the his- 
tory of the war is finally written these forces will 
be found to be of secondary importance. The real 
cause of the war is to be found far back of the sum- 
mer of 1914; it is to be found in the new economic 

vii 



viii PREFACE 

and financial forces set in motion in the closing 
years of the last century. 

The present war and the wars of the past ten 
years are the result of endless conflicts and suspi- 
cions, of balked ambitions and fears, of diplomatic 
overreachings and injured dignity, of a thousand 
irritations that do not appear in the diplomatic 
correspondence. Present-day wars are primarily 
the result of the conflict of powerful economic in- 
terests radiating out from the capitals of Europe, 
which, with the foreign office behind them, have 
laid the whole world with explosives which only 
needed a spark to set all Europe aflame. Surplus 
wealth seeking privileges in foreign lands is the 
proximate cause of the war just as wealth seeking 
monopoly profits is the cause of the civil conflicts 
that have involved our cities and States. It is 
the struggle of high finance bent on the exploita- 
tion of weaker peoples that has turned Europe into 
a human slaughter-house and arrayed 400,000,000 
peaceful people against one another in a death 
struggle. 

When the story of the war comes to be written 
the origin will be found hidden in the diplomatic 
victories and resentments over Morocco and Turkey 
rather than in the murder of the Archduke Ferdi- 
nand; it will be found in the aggressions of British, 
French, and German financiers and concession 
seekers rather than in the ambitions of the Czar 



PREFACE ix 

or Kaiser; it will be found in the struggle for the 
exploitation of weaker peoples, of whom no less 
than 140,000,000 together with 10,000,000 square 
miles of territory have fallen under the dominion 
of Great Britain, France, and Germany during the 
last thirty years. 

These conflicts have been on a titanic scale. 
They have led to the ending of the liberties of free 
peoples, to colonies and protectorates, to the closed 
door, to the imprisonment of the Mediterranean, 
to the raising of obstacles and Gibraltars to free- 
dom of trade and commerce. They have created 
a thousand rumors, suspicions, and hatreds, a great 
increase in armaments for the protection of private 
investments; they have given birth to diplomatic 
intrigues and demonstrations of force that have 
changed a conflict of private groups into a conflict 
of peoples. 

Behind these private groups of financiers and 
concession seekers one finds the foreign office and 
diplomacy, the war lords and the ruling caste. To- 
gether they have made common cause with the 
munition makers and the trading classes. These 
classes own or control great portions of the press. 
They mould public opinion. They control political 
advancement. They are society. These forces are 
the state much as Louis XIV or Frederick the Great 
was the state. Outside of France, and to some 
extent Great Britain and Italy, the state in its for- 



x PREFACE 

eign relations is little more than the political and 
financial will of the ruling classes. It is a merger of 
seventeenth and twentieth century feudalism. 

Any question as to the correctness of this inter- 
pretation of the cause of the European war will, I 
think, be laid at rest by a reading of the record of 
British penetration into Egypt and Africa; of 
French aggressions in Algeria, Tunis, and Morocco; 
of the partition of Persia by Russia and England; 
of German relations with Turkey; of the intrigues 
and bad faith of the powers toward the Balkan 
states, China, Persia, and Morocco; of the struggles 
of the powers over the building of the Bagdad Rail- 
way; of the intimacy of the munition makers and 
the financiers with their respective governments and 
foreign offices; of the balked ambitions of the mine- 
owners that brought on the Boer War; of the diplo- 
matic moves of the chancelleries of Europe during 
the last quarter of a century. 

And were we moved by acts of oppression com- 
mitted by the Christian powers as we are by the 
atrocities of the Turks in Armenia, we should find 
in these records a story of cruelty and disregard of 
human rights and liberties that has few parallels in 
modern times. 

In this record there is little to distinguish the act 
of one nation from another's. If greater emphasis 
seems to be laid on the acts of Great Britain and 
France it is due to the fact that greater liberty of 



PREFACE xi 

expression prevails in these countries than in Ger- 
many and Russia, and the records have been more 
frankly exposed to view. But a cross-section of 
one nation is a cross-section of the other. Financial 
morals are the same the world over when weaker 
peoples are involved. The indictment is against the 
ruling classes, not against the people; it is against 
Junkerism in politics, in diplomacy, and primarily in 
finance. But it is not the Junkerism of Germany 
alone, it is the Junkerism of England, Russia, and 
Austria-Hungary as well. 

As a result of the European war the United 
States is confronted with the same forces that have 
drawn Europe into the present conflict. Ambitions 
and fears have been aroused that have united the 
privileged classes in a movement for financial im- 
perialism, for a great naval programme, for colossal 
expenditures for preparedness, and unless some hand 
interpose to prevent it the ideals of America and 
the democratic traditions of a century will be sub- 
merged in the new imperialistic programme that has 
no place in our life. 

The gravest danger to the country is from within. 
The danger is as real as any that ever confronted 
us. Private interests are at war with the interests 
of the nation. They menace our peaceful security. 
Surplus wealth has appeared. We have become a 
creditor nation. The resources and railroads of the 
country have passed under monopoly control. The 



xii PREFACE 

colossal profits of the past two decades from ex- 
ploitation are no longer possible. They can only be 
secured in the less-developed places of the globe, 
where backward peoples and lack of capital offer 
opportunities for investment. These are the condi- 
tions that have preceded imperialism and aggression 
the world over. Surplus wealth in search of mo- 
nopoly profits led the financiers of Europe into dis- 
tant parts. Here they came into conflict with other 
financiers in search of similar gains. To protect 
their investments and insure their loans and conces- 
sions the investors demanded a great military and 
naval establishment. The foreign offices and gov- 
ernments became involved. Irritations and diplo- 
matic controversies finally ripened into war as the 
only means for the arbitrament of the conflict. 

This is the danger which now confronts us. It 
is a danger from within rather than from without. 
It is a danger we should anticipate and provide 
against, just as we provide against a foreign foe. 
And if we take adequate precautions against the 
foes within the country we shall safeguard ourselves 
against those without. For if the war in Europe 
teaches anything it is that the foes within are re- 
sponsible for the foes without. It is they who are the 
jingoes, it is they who are loudest in advocating 
preparedness, it is they who talk most of national 
dignity and honor. It is they, too, who insist on the 
destiny of the country and a place in the sun. There 



PREFACE xiii 

is scarcely a war or war scare of the past twenty 
years, unless it be those of the Balkans, that, in its 
last analysis, is not the result of the activities of in- 
dividuals and classes within the country rather than 
of aggressive foes from without. 

In the gathering of material for this book I have 
received valuable assistance, which I desire to 
acknowledge, from Miss Gertrude Borchard. 

Frederic C. Howe. 

New York, March, 1916. 



CONTENTS 

PAGE 

Preface vii 

CHAPTER 

I. The People and War 3 

II. The War Lords 6 

III. Feudal Foundations ,31 

IV. Secret Diplomacy 47 

V. Surplus Wealth 61 

VI. Financial Imperialism 72 

VII. The Flag Follows the Investor 83 

VIII. The Merger of Finance and Foreign Affairs 89 

IX. Concessions and Monopolies 97 

X. The "War Traders" and Munition Makers . 109 

XI. The Cause of Increasing Armaments 142 

XII. The Mind of Warring Europe 153 

XIII. The Beginnings of British Imperialism and the 

Occupation of Egypt 165 

XIV. France and the Morocco Incident 176 

XV. The Partition of Persia 195 

XVI. Germany and the Bagdad Railway 214 

xv 



xvi CONTENTS 

CHAPTEB PAGE 

XVII. The Struggle for the Mediterranean. . . . 239 

XVIII. China and the Chinese Loan . 250 

XIX. German Imperialism and the Trading Colonies 257 

XX. Germany and the Far East 268 

XXI. Gains and Losses of Imperialism 275 

XXII. Shifting the Cost of War 290 

XXIII. Privilege the Cause of War 300 

XXIV. War and Labor 310 

XXV. The Issue that Confronts Us 316 

XXVI. The Possibility of World Peace 328 

XXVII. Democracy and the Road to Peace 339 

Index 361 



WHY WAR 



CHAPTER I 
THE PEOPLE AND WAR 

The present European war is not a people's war. 
It is not a race war. Prior to its outbreak no na- 
tional boundaries were menaced, no national honor 
was assailed. Even to-day, after eighteen months of 
conflict, there is no agreement as to what the war 
is about. Four hundred million people are engaged 
in a death struggle, fifty billions of wealth has al- 
ready been wasted, all Europe is a charnel house, 
and the cause of it is shrouded in mystery. 

The war is not a struggle of Slav and Teuton, of 
Anglo-Saxon and Latin. There is no race surge, 
no race hunger for the lands of other peoples; there 
is no lust for overseas expansion as an outlet for an 
overcrowded population at home. There is no 
such thing as race hatred among the people. This 
is fiction of the press, of foreign ministers, of the war 
classes. 

People do not want war. War springs from causes 
wholly outside the lives, interests, and feelings of the 
people. 

Nor are wars made by peoples. There would be 
some excuse for wars if they were. Not even in 
democratic countries are the people consulted. No 



4 THE PEOPLE AND WAR 

poll of the voters is taken; no effort is made to as- 
certain public opinion. Even the elected represen- 
tatives only register their assent to an accomplished 
fact. 

Bismarck drove Prussia into war with Denmark, 
and later with Austria to Prussianize Germany and 
advance the house of Hohenzollern. By his own 
admission he altered a telegram to bring about 
war with France. The Crimean War was a diplo- 
mats' war. The Boer War was not a people's war. 
It was largely a mine-owners' war. The Russo- 
Japanese War was certainly not a people's war, for 
in neither country is there more than a semblance 
of popular government. 

The present European war was not made by the 
people. In none of the warring nations were the 
people considered, in none of the countries was 
there any discussion; in none was there opportu- 
nity for delay, for negotiations, for knowledge out- 
side of the cabinets, war offices, or ruling houses. 
And with the possible exception of France there 
was no national grievance, no promptings of re- 
venge, no knowledge of what the trouble was all 
about. 

Tens of millions of men have been taken from 
their homes and sent to the trenches for reasons 
which have not been explained to them or by virtue 
of secret alliances in whose making and as to whose 
propriety the people had no voice. 



THE PEOPLE AND WAR 5 

Wars are made by irresponsible monarchs, by 
ruling aristocracies, by foreign ministers and diplo- 
mats. Wars are made by privileged interests, by 
financiers, by commercial groups seeking private 
profit in foreign lands. Wars are made in the dark 
behind closed doors. War is still the plaything of 
ruling classes, much as it was in the time of Richelieu 
and Mazarin, of Frederick the Great and Napoleon. 



CHAPTER II 

THE WAR LORDS 

The important fact about Europe is this: the 
greater powers, with the exception of France, have 
not wholly emerged from feudalism. The forms 
have changed; the personal relations of master and 
serf have been abolished, but the essentials of 
feudalism, political, economic, and social, remain. 
Constitutions have been adopted, but they legalized 
the power of the feudal classes which had previously 
been enjoyed by force. The constitutions were 
written by the old aristocracy and ruling houses 
which modified the old order by admitting the busi- 
ness and commercial classes to some participation 
in the government. This is the essential meaning 
of the political changes and revolutions of the nine- 
teenth century. The bourgeoisie were granted 
political recognition, not on terms of equality, not 
to an equal voice in the affairs of the nation, but on 
such terms as the old nobility fixed. Even to-day, 
except in France and Italy, neither political equality 
nor universal suffrage exists in the warring coun- 
tries of Europe. There still remain the hereditary 



THE WAR LORDS 7 

upper chambers, the House of Lords, the Bundes- 
rath, the grand dukes, which have an equal and 
generally a controlling voice in the state, and into 
which chambers the commercial and working classes 
have never been admitted. 

The feudal nobility is still supreme in the politics 
of Europe, and outside of France, Italy, and Great 
Britain it is the only voice in the great powers that 
is really heard. In most essentials the old order 
remains as it was. This is particularly true of the 
central powers and Russia, into which the influences 
of the French Revolution scarcely penetrated. In 
many respects it is true of Great Britain as well. 

The nations immediately responsible for the pres- 
ent war are those in which the people have only 
a suggestion of power. In Germany, Russia, and 
Austria-Hungary the rule is still in the hands of 
hereditary rulers, of the feudal nobility, which fills 
the higher offices of state and through its position 
and power controls the government, the press, free- 
dom of speech, and the right of discussion as well. 
Germany. 

Germany is ruled by the Kaiser and the aris- 
tocracy, and the rule is only less complete than it was 
in the time of Frederick the Great. There is only 
an appearance of representative government or pop- 
ular control. There is a constitution, it is true, but 
a constitution imposed on Germany by Bismarck 
in 1867, after the defeat of Austria, and modified in 



8 THE WAR LORDS 

unimportant particulars after the overthrow of 
France, in 1871. The twenty-six states and free 
cities which comprise the empire were united under 
the Prussian yoke, partly through choice and partly 
through coercion. In none of the states were the 
people consulted. 

Under this constitution Prussia controls the em- 
pire. And Prussia in turn is ruled by the old 
feudal aristocracy, which remains only less reac- 
tionary than it was in the eighteenth century. Bis- 
marck's ambition was the substitution of Prussia 
for Austria as the dominant power in the federa- 
tion of German states. He loved his King, he loved 
Prussia, and he loved the old feudal aristocracy, to 
which he himself belonged. And the constitution 
which he imposed upon Germany achieved the 
supremacy of this trinity. Under it the Prussian 
aristocracy rules with much of the irresponsibility of 
two hundred years ago, before the advent of con- 
stitutions, ministries, and a popular ballot. The 
Junker is assured control by a constitution that can 
only be changed by the consent of the Junker him- 
self. It cannot be changed by the people; it can- 
not be changed by the action of all of the other 
twenty-six states in the empire, for by its terms 
Prussia can veto any amendments that may be 
offered. And under the constitution of Prussia the 
Junker is supreme. Thus the Junker is the final 
arbiter in the constitution of Germany. 



THE WAR LORDS 9 

The Kaiser and Parliament. 

A ruling caste based upon the possession of landed 
property was written into the German constitu- 
tion. The King of Prussia was made hereditary 
Emperor. With the consent of the Bundesrath he 
can declare war and make peace. He is commander 
of the army and the navy. He appoints the chan- 
cellor of the empire, who is his personal representa- 
tive and is responsible to him alone. The chancellor 
is not responsible to parliament, as in all other con- 
stitutional monarchies; he is not the leader of a 
party, and is in no wise responsive to the people or 
to their elected representatives. 

There are two houses in parliament: one the 
Reichstag, or lower house, and the other the Bundes- 
rath, or senate. Members of the Reichstag are 
elected by manhood suffrage. But the Reichstag 
is not a popular parliament like the House of Com- 
mons. The real legislative body is the Bundesrath, 
which is made up of 58 representatives or agents 
appointed by the rulers of the twenty-six states. 
And it is a monarchical body, strongly conservative 
in all its leanings. It is responsible only to the ruling 
houses. Its members are not elected, and they vote 
as the individual states direct. The meetings of 
the Bundesrath are secret. In this chamber Prussia 
has 18 votes out of 58, and no change can be made 
in the constitution if opposed by 14 votes. 

By this constitutional legerdemain Germany is 



10 THE WAR LORDS 

ruled by the Kaiser and his appointed chancellor 
and the delegates appointed by the royal houses 
and the three free cities of Hamburg, Bremen, and 
Liibeck. It would be far better for Germany if 
she had no constitution. Then revolution would 
have a chance, as it did against Charles I and 
Louis XVI, as it did in 1830 and 1848. Under the 
constitution the appearance of popular government 
is given to an oligarchy. Feudalism has been legal- 
ized, with all of the sanctity which legality involves. 
The Ascendancy of Prussia. 

Even with all these obstacles to representative 
government the empire might have a popular sanc- 
tion if Prussia had representative institutions. For 
Prussia, as said before, rules Germany. But the 
reverse is true. Prussia is the most reactionary of 
all of the states in the empire. It is far more reac- 
tionary than Bavaria, Saxony, Wurtemberg, or 
Baden, which, while monarchical in form, are quite 
democratic in opinion, and in their constitutions as 
well. 

The ascendancy of the Junker in Prussia is pre- 
served by three devices. First, by the three-class 
system of voting; second, by the unjust distribu- 
tion of seats in parliament; and third, by the open 
and indirect ballot. 

There is no such thing as manhood suffrage in 
Prussia. Property, rather than people, votes. The 
voters are divided into three classes according to 



THE WAR LORDS 11 

the amount of income taxes paid by each. Then 
those who pay one-third of the taxes are checked 
off, and these elect the delegates, who in turn elect 
one-third of the representatives to parliament. 
Then a second third are checked off, and they in 
turn elect a second third of the representatives, 
while the great majority of the electors, who in 
small sums pay the final third of the income taxes, 
select the remaining third of the members. By 
this means from 3 to 10 per cent, of the qualified 
electors choose two-thirds of the representatives to 
parliament. And the large taxpayers who compose 
the first and second class of electors are the great 
estate owners or Junkers, who along with the Kaiser 
are the government. 

Bismarck himself called the Prussian electoral 
system "the worst of all electoral systems." It is 
against this system that the Socialists and Radicals 
have protested for years. 
Unfair Distribution of Seats in Parliament. 

But even the control of the great estate owners 
might be overthrown under the three-class system 
of voting if the cities with their rich business and 
financial classes were given representation in par- 
liament proportionate to the taxes paid by them. 
For Prussia contains most of the large cities in the 
empire, and during the past generation a powerful 
commercial aristocracy has arisen that craves full 
share of political power. Precautions were taken 



12 THE WAR LORDS 

against this danger by a distribution of parliamen- 
tary districts made while Prussia was still an agri- 
cultural country. This distribution has not been 
changed in fifty years, and the Junkers will not 
permit it to be changed. As a consequence, in 
Prussian elections property votes most powerfully 
when the property is landed. The mercantile 
classes are only less discriminated against than are 
the working classes. For instance, under this sys- 
tem Berlin has but 9 members in parliament, while 
it would have 24 if the districts were fairly distrib- 
uted. This is characteristic of the other cities as 
well. 

Finally, there is no secret ballot. The voting is 
open and viva-voce. In consequence, the peasant 
and the worker are afraid to express their opinions. 
They fear eviction, the loss of a job, or some other 
oppression from those who control their means of 
livelihood. 

By these means Prussia is ruled by the landed 
aristocracy or Junkers almost as arbitrarily as in 
feudal times. There is only a semblance of popular 
government, and outside of the disfranchised classes 
no real belief in it. Only the Socialists and the 
Radicals remain of the revolutionary groups which 
prior to 1848 struggled so valiantly for a really con- 
stitutional government. 

Were there any approach to popular government 
in Prussia the Socialists would be the largest single 



THE WAR LORDS 13 

party, if not the controlling one; for they are dom- 
inant in all of the cities and industrial districts, 
from all of which, with the possible exception of 
Cologne, Socialist deputies are returned to the 
Reichstag. As a matter of fact, however, the So- 
cialists were until recently unable to elect a single 
member of the Prussian parliament, while the rich 
commercial classes of the cities (who should be in 
control even under the three-class system of voting 
if the districts were justly distributed) have a much 
smaller representation than their voting strength 
entitles them to. 
The Ruling Caste. 

These are the constitutional devices under which 
the Junker, or landed aristocrat, rules Germany. 
He rules with but little concern for public opinion. 
Certainly he is in no way responsive to it. He 
cares little for the political rights of the working 
classes. He has a contempt for the peasant who 
works on his estate. He stands aloof from the 
farmer and professional classes, and lives almost as 
isolated and detached as did his ancestors in an 
earlier age. Along with the Kaiser the Junker is 
the state. And he believes, as did Louis XIV, who 
coined the phrase: "The state! I am the state." 
Nowhere in Europe, unless it be in Russia and Aus- 
tria, is the aristocracy as contemptuous of repre- 
sentative government and of all other classes as 
in Prussia. 



14 THE WAR LORDS 

But the power of the Junker does not end with 
his control of parliament. The Junker fills all of 
the important places in the empire. From this 
class come the chancellors and the ministers. The 
King's counsellors are almost all from the aris- 
tocracy. The Junker fills the high places in the 
foreign and diplomatic service. He officers the 
army and the navy. He closes the crack regiments 
against those who are not of his caste. From some 
of the regiments even the sons of merchant princes 
are excluded. The higher positions in the civil 
service are also reserved for him, as are practically 
all of the more dignified places of state adminis- 
tration. 

War is the Junker's calling, just as it was two 
centuries ago. He is trained in the military schools. 
He works hard and laboriously. His salary is small, 
but his social position is the highest in the empire. 

By reason of his power and social position the 
Junker makes war the important thing in the em- 
pire. And this influence affects all of the upper 
classes. The merchants and middle classes are 
affected by it. The motive force of Junker state- 
craft, of science, and of legislation is war, the 
preservation of his privileges, and the advancement 
of German power. 

Great Britain. 

The government of Great Britain, with some im- 
portant modifications, is lodged in the same classes 



THE WAR LORDS 15 

as it is in Germany. The forms are different, but 
the ultimate power is in the landed class, modified 
materially by the greater political recognition given 
to the commercial and working classes, as well as 
by the far greater freedom of speech, of the press, 
and of the individual which obtains. Great Britain 
does protect the liberties of the person, but she con- 
cedes far less popular government than is generally 
supposed. 

This is not generally recognized, for England is 
the mother of parliaments. She has admitted all 
classes to the suffrage, though not on equal terms, 
for plural voting still obtains. Moreover, Great 
Britain is in many respects very democratic. The 
ministry is responsible to Parliament and to the 
party in power, rather than to the King. The budget 
is prepared by the House of Commons, and all of 
the externals of popular government are jealously 
insisted on. But that is one trouble with England. 
She is satisfied with externals. There is little critical 
analysis of the actual facts. There is veneration for 
things that are. So long as the forms are observed 
there is little complaint as to underlying realities. 

The Power of the Aristocracy. 

The monarchy exists for show purposes. The 
King has lost almost all substance of power. He is 
not even consulted on. legislation and is only for- 
mally conferred with on cabinet appointments. His 
power began to wane with Magna Charta, when the 



16 THE WAR LORDS 

landed barons, the feudal estate owners, stripped 
him of some of his feudal rights. The process has 
continued ever since. The real power of the Crown 
ended with George III, and the privileges of king- 
ship have been diminishing to the vanishing-point 
ever since. 

The House of Lords has always been, and still is, 
a hereditary house of landlords. Only a minority of 
its members come from any other class. And these 
have little influence. The brewers, distillers, finan- 
ciers, literary men, and lawyers have little voice in 
public affairs. It is the great landed proprietors 
who own practically all of the land of Great Britain 
that form the House of Lords. It has always been 
a house of landlords. That is what it is to-day. 

Up to 1910 the House of Lords was supreme in 
legislation. The House of Commons was permitted 
to govern only so long as it kept its hands off the 
things the aristocracy owned. Legislation which 
touched the privileges of the ruling class was thrown 
out by the lords, who are the sanctuary of privilege 
in England, just as the grand seigneurs of France 
were the sanctuary of the abuses of the ancien regime. 

Public Office an Aristocratic Privilege. 

It is not through Parliament alone that the 
aristocracy rules. That is merely one means of con- 
trol of the nation. Even a Liberal ministry con- 
tains representatives of the old nobility. The sec- 
retary of foreign affairs is almost always from the 



THE WAR LORDS 17 

aristocracy. The diplomats and foreign ambas- 
sadors are, with rare exceptions, from the same class, 
as are the representatives sent to rule the colonies 
and dependencies. The higher civil service is re- 
cruited from the gentry, while the army and navy 
are officered by it. The Church of England is part 
and parcel of the system, and is still supported by 
the ownership of land and by landed tithes paid by 
the tenants. The priesthood, from the highest 
dignitary to the poor, underpaid curate, is recruited 
from the younger sons and dependent relatives of 
the aristocrary. The "livings" are the personal 
patronage of the landed families. They are ec- 
clesiastical "spoils." 

Social Caste and Politics. 

The professional classes also reflect the will of 
the aristocracy. The lawyer and solicitor are its 
handmaidens, for the aristocracy is the employing 
class. The solicitors manage the estates; the bar- 
risters appear for the aristocracy in court. The 
same is true of the professors and the teachers, 
especially in the older institutions of learning. 

Caste is writ large in Great Britain. It is all- 
pervasive. Honors, preferment, and the doors of 
social recognition open and close to those who do 
the bidding of those who rule. In England there 
are a score of privileges before which men bow, and 
they are so entwined with the things men and 
women hold dear that they affect all classes. 



18 THE WAR LORDS 

All of the economic and social forces of the king- 
dom sustain the aristocracy. The control is so 
subtle that it cannot be assailed. The passion for 
a title weakens the conscience of the scientist and 
the poet, the artist and the dramatist, the editor 
and the statesman, the politician and the barrister. 
The lure of a knighthood quenches the fire of the 
agitator, and the radical of to-day becomes the 
cautious reformer of to-morrow. All these influ- 
ences affect the nation; they influence its rep- 
resentatives. Progress has to make its way against 
fear of anything new and untried, of anything 
un-British. 

Education and Caste. 

Everything makes for the permanence of these 
conditions. Higher education is far less common 
than it is in America and Germany. The univer- 
sities of Oxford and Cambridge are still governed 
in accordance with the traditions of the past. They 
are very expensive. They make no appeal to the 
poorer classes; there is no attempt on the part 
of the nation to extend their usefulness, as in 
America, Germany, and Denmark. The "public 
schools" which prepare for the universities are 
also the schools of the aristocracy, while the board 
or common schools have until very recently been 
under the influence of the established church. 

This is the secret of the political and social power 
of the aristocracy. It is not necessary that the 



THE WAR LORDS 19 

constitution should confer power upon it. Power 
is conferred by custom, by tradition, by the con- 
trol of the positions of distinction, and in the final 
analysis by the ownership of the land by the ruling 
class. 

In Great Britain, as in Prussia, the people do not 
really rule. They participate freely in the govern- 
ment, they elect their representatives to Parliament, 
but the rule is still in the hands of the old feudal 
nobility, whose political and economic privileges re- 
main only less sacred than they were in an earlier 
age. 

Austria-Hungary. 

Austria-Hungary is in many ways the most aristo- 
cratic state in Europe. There is a semblance of 
popular government, but the Emperor and the aris- 
tocracy rule. The electoral system is very confused, 
so as to keep down the warring nationalities which 
comprise the empire. The Senate, or the Upper 
House, like the Bundesrath in Germany, is com- 
posed of princes of the blood, archbishops and bish- 
ops, the heads of noble landowning families, and 
members appointed for life. The great estate own- 
ers also enjoy privileged places in the Lower House, 
as do representatives of chambers of commerce. 
There is only such freedom of speech, of the press, 
and assemblage as the bureaucracy permits. The 
warfare of a score of different nationalities is the 
controlling issue in domestic politics, and the ex- 



20 THE WAR LORDS 

pansion of the empire into the Balkans the im- 
pelling motive of foreign affairs. 

The old feudal aristocracy rules in its own inter- 
ests. It fills the higher positions in the court 
circles. It officers the army. It controls the for- 
eign office. Its members form the diplomatic corps. 
Caste is writ large in the country, and except in 
Hungary and Bohemia there is little democratic 
spirit outside of the Socialist groups. The rule of 
the house of Hapsburg and the church has crushed 
the nation and left it a prey to the privileged 
classes. 

Russia. 

The people have no voice in the government of 
Russia. Revolution is the only form of expression. 
Politically, economically, and socially the position of 
the common people is much as it was in the seven- 
teenth century. Serfdom is abolished in form but 
not in essence. Only the legal relationship of serf- 
dom is gone. Russia is still feudal, and feudal in 
its most cruel forms. 

The Czar reigns, but the grand dukes and the 
landowning aristocracy rule. They form the nation 
in so far as its politics, its social life, its foreign 
policy, and its internal administration are concerned. 
The landed aristocracy is exclusive. It controls 
the policies of state. There is scarcely a semblance 
of representation to even the commercial classes. 
Underneath the autocratic rule of Russia is the 



THE WAR LORDS 21 

feudal system with all of the arrogance and class- 
selfishness of an earlier age. 

Alexander II announced to the nobles in emanci- 
pating the serfs in 1861 : " It is better to hand down 
liberty to the people than to allow them to win it 
for themselves." And such emancipation as was 
granted is more profitable to the feudal landowner 
than was serfdom. It relieved him of responsi- 
bility and increased his power of expropriation. 
The ruling aristocracy was intrusted with the prepa- 
ration of the laws freeing the serfs, and later with 
their execution. And they protected their own in- 
terests so well that the condition of the peasants 
was but little better after the emancipation than it 
was before. By the terms of the proclamation the 
serfs were to be freed without compensation to the 
owners, and were to be given enough land for their 
needs and to meet the requirements of the state. 
The government agreed to pay the landlords out of 
public loans and to collect the amount from the 
peasants, making the payments extend over forty- 
nine years. For two years after the decree of abo- 
lition there was to be a transitional stage of half- 
freedom. 

The Peasant. 

But emancipation has meant simply a change of 
masters for the serf. He is now the slave of the 
state instead of the slave of the landowner. It 
would seem to be to the advantage of a state to have 



22 THE WAR LORDS 

a prosperous peasantry. But in Russia the official 
class is the state, and the official class cares for little 
but its own immediate advantage. The aristoc- 
racy, as in France before the Revolution, collects 
the taxes from the wretched peasants, and makes 
them so high that they often exceed what the land 
will possibly produce. Such taxes are, of course, 
an absurdity; but the ruling classes do not want 
a free and independent peasantry but a new form 
of serfdom, by which the state will obtain all the 
peasant produces, except a mere subsistence for him- 
self and his family. Taxes are so heavy and so un- 
justly distributed that the peasant must eke out his 
living by working on the large estates, thus provid- 
ing the aristocracy with an abundant supply of 
cheap labor. The land allotted the peasants does 
not produce enough for their needs, and there have 
been frequent famines in various parts of the coun- 
try. The government opposes the migration of the 
peasant in his effort to better his lot. He has to 
rent more land from the proprietor and pay for it 
in work, often having to pledge his work for years 
in advance to keep himself from starvation. Such 
contracts are enforced by the government. 

The peasants' allotments have been growing 
smaller, because it is the policy of the government 
to keep the population on the land for fear of a city 
proletariat; and less than 12 per cent, of the people 
reside in towns. In Russia, with her primitive 



THE WAR LORDS 23 

methods of agriculture, 123^ dessiatines of land 
(33 acres) are needed to support a family. Theo- 
retically, this was the amount allotted to each fam- 
ily after the emancipation. In practice the peasants 
were cheated from the start, and their holdings have 
since been steadily decreasing in size. By 1900 
they had fallen to less than half what is considered 
necessary to support a family. Farm stock, always 
an indication of prosperity, has also decreased in the 
fifty provinces of European Russia. Live stock 
per 1,000 farms dropped from 9,329 in 1870 to 6,474 
in 1900, and horses from 1,329 to 920. The per- 
centage of horseless farms rose from 26.9 to 32.2 
in the short period 1882-96. These are the offi- 
cial statistics, which in Russia are usually rose- 
colored. 1 

Exploitation by the Privileged Classes. 

Russia represents the most notorious case of ex- 
ploitation by the ruling classes. The government 
cares only for its absolutism and considers the degra- 
dation and ignorance of the peasants as a valuable 
safeguard to its security. 

The peasant communities over most of the coun- 
try own their land in common, and distribute it 
among their members periodically. The members 
are jointly and severally responsible for the taxes. 
These communities, or mirs, are pure democracies in 
so far as their local affairs are concerned. Cavour 

1 Simkhovitch, V., in Political Science Quarterly, vol. 21 (1906). 



24 THE WAR LORDS 

had great hopes for Russia through them. But they 
are powerless against the official class. In some 
places the peasants may not leave their villages 
after dark without authority from the officials. 

These mirs with their communal property are a 
natural development among many Slavic peoples. 
The Russian Government favors them because they 
keep the peasant from owning his land outright, 
and thus gaining the independent ideas of the yeo- 
man of other countries. Indeed Count Kisseloff, 
who directed the destinies of the peasants for years, 
forced this institution upon 500,000 peasants who 
had not known it before. In 1910, it is true, a law 
was passed giving peasants the right to buy their 
property outright, but up to the present time little 
has been done in this direction, partly because the 
peasant has almost no money, and partly because 
he inclines to communal ownership in most parts 
of the country. The class of small private land- 
owners is very small, and many of them are no better 
off than the peasants. 

The drink evil was encouraged when the sale of 
alcohol became a government monopoly, in 1897. 
The value of alcohol consumed doubled within five 
years. "Local option" in the mirs was no longer 
permitted. The state budget was built up on the 
poison given to the people. "The moral deteriora- 
tion of the peasants," says Walling, "is a matter of 
indifference to the government, as is their intellec- 



THE WAR LORDS 25 

tual and physical starvation." 1 The sale of vodka 
was prohibited during the early months of the war. 
When the money of the peasant was more needed 
than his health the sale of alcohol was encouraged, 
but as soon as the government needed soldiers the 
health of the army became more important than 
the needs of the treasury. 

Moreover, in spite of the semi-starvation of the 
peasants, it is the policy of the state to encourage 
the export of grain, for the maintenance of the gold 
standard and the payment of the interest on for- 
eign loans. "If the agricultural exports, especially 
wheat, do not rise rapidly, then the whole financial 
policy deliberately chosen by the government has 
proved itself a failure." 2 Only when famines occur 
does the government relax its policy. 

The Duma, with such uncertain powers as it has, 
is entirely a landlords' Duma. By a law of 1907 
the electors of the working men, peasants, and the 
poorer classes in general were reduced to one-half 
their former members, while those of the landlords 
were increased 30 per cent. Most of the Russian 
provinces are in the power of the landlords, or a 
combination of the landlords and the richest class 
of the city electors, who had the right to vote apart 
not only from the working men but also from the 
majority of the middle class. The peasants had 
nearly one-half the representatives in the second 

1 Russia's Message, p. 332. 2 Walling, idem. 



26 THE WAR LORDS 

Duma; in the third they had less than one-eighth. 
Any two landlords had the same vote in the election 
of the third Duma as any one thousand peasants. 
As a consequence, the peasants and small landown- 
ers do not consider it worth while to vote at the 
elections. 

France. 

France is the most democratic of the great nations 
of Europe. In many ways France is the most 
democratic nation in the world. The people are 
open-minded, and the government reflects the in- 
terests and opinions of the common man. The 
ruling class is the small landowner, shopkeeper, 
and artisan. Politics is a topic of universal interest. 
Everybody talks politics, not so much from a 
narrow, selfish point of view as from an interest in 
politics as an institution. The press tends to re- 
flect the interests of the average man. It is not 
owned or controlled, as in England, America, and 
Germany, by the counting-room or by privileged 
interests. It is a popular press, free and independent 
in its convictions. The working classes and the 
bourgeoisie are serious-minded, and are taken seri- 
ously by parliament. 

There is relatively little conflict of special inter- 
ests in parliament. Parties do not represent priv- 
ilege and property. They represent more nearly 
the whole population. The newspapers are quick to 
protest against any legislation for a class or interest. 



THE WAR LORDS 27 

And no economic group has such influence in the 
political life and thought of France as is possessed 
by the railroad and tariff interests of America or 
the landowners and financial classes of England and 
Germany. A possible exception is the influence of 
the great banking and financial institutions, which 
will be referred to later. 

The government is responsive, possibly too re- 
sponsive, to public sentiment. Ministries change, 
but the stability of the people and the real govern- 
ing agencies are not affected by the change. The 
constitution also reflects the democratic qualities 
of the nation. The constitution, says President A. 
L. Lowell of Harvard, "is not comprised in any one 
document, but in a series of distinct laws, and it 
contains few provisions limiting the functions of the 
different bodies, or prescribing fundamental rights 
which the state is enjoined to respect. ' n 

Democratic Government. 

The people have placed the life of the nation in 
the hands of their representatives. They trust the 
government which they themselves select. There 
are no checks and balances, no bill of rights, no ap- 
peals to the courts, no superior, age-long instrument 
to interpose its veto on the convictions and needs of 
the present. The constitution provides a machinery 
of government and stops at that. And the constitu- 
tion can be easily amended if it does not meet the 

1 Governments and Parliaments in Continental Europe, vol. I, p. 8. 



28 THE WAR LORDS 

needs of the time. It is not an unyielding instrument 
like the constitutions of the United States and of 
Germany. All that is necessary is for both houses 
of the National Assembly to meet together, on their 
own motion or the call of the President, and enact 
a measure altering the constitution. That is all 
that is required. The amendment is not even re- 
ferred back to the people. The constitution is 
merely a very formal aw. Yet the constitution 
has remained almost unaltered since its adoption in 
1875, only two amendments having been made in 
the intervening years, one in 1879 and the other 
in 1884. 

Parliament is really omnipotent. The President 
has no veto, and even if parliament should pass an 
act in violation of the constitution it would be 
legally binding, for there is no authority above the 
National Assembly to declare its actions void. How- 
ever, public opinion is an effective check to any 
proposed change unless it is clearly demanded by a 
generally recognized emergency. 

The ballot, too, is democratic, far more so than in 
England. It is extended to all males over twenty- 
one years of age who are under no legal disability. 
There are no property qualifications and no plural 
voting. The ballot is secret and direct. The Presi- 
dent is chosen by the National Assembly for a term 
of seven years. He has large executive powers and 
responsibilities, but no control directly or indirectly 



THE WAR LORDS 29 

over legislation or the make-up of the cabinet, which 
is responsible to the Assembly alone. 

France has gone a long way toward the realiza- 
tion of the ideals of Rousseau, Voltaire, and the 
philosophers who preceded the Revolution. She 
has substantially achieved the revolutionary prin- 
ciple that "law is the expression of the public will. 
Every citizen has a right to participate personally 
or through his representative in its formation." 
The War Lords of Europe. 

These are the classes which rule Europe. These 
are the classes which made the European war. In 
none of the nations, except France, Italy, and 
England, are the people consulted. And in declar- 
ing war the people are not consulted at all. No- 
where, unless it be in France, is there any popular 
control over war and peace, over foreign policy and 
the making of treaties and alliances. The fate of 
400,000,000 people is for the most part controlled 
by the aristocracy, whose members are the de- 
scendants of the eighteenth-century nobles, and 
who still have a contempt for democracy. They 
think in terms of the feudal age. Even in England 
this is true, as was seen by the bitter conflict of the 
House of Lords over the budget, over the modifi- 
cation of its veto on legislation, but most of all in 
its attitude toward Home Rule for Ireland, when 
the aristocratic officers of the army resigned and 
refused to serve, and the landowning House of 



30 THE WAR LORDS 

Lords openly or covertly supported civil war on 
the part of Ulster for the protection of its ancient 
privileges and property. For the Home Rule ques- 
tion is primarily an economic question. Shall the 
people of Ireland or the non-resident landlords in 
the House of Lords rule? This has been the crux 
of the Irish question from the beginnings of English 
dominion. 



CHAPTER III 
FEUDAL FOUNDATIONS 

A second important fact to an understanding of 
Europe is this: the ruling class is the owning class, 
much as it was in the eighteenth century. The old 
aristocracy continues to rule because it owns the 
land that gave it power from the tenth to the eight- 
eenth century. The forms of government reflect 
the economic foundations on which the state is 
reared. 

A study of the politics of Europe shows that 
wherever the old feudal estates remain untouched 
there the old oligarchy is in control. This is the 
condition in Russia, Austria-Hungary, Prussia, and 
Great Britain, in which countries the land is still 
largely held as it was in the seventeenth and eight- 
eenth centuries. On the other hand, France, Italy, 
Switzerland, Scandinavia, Holland, Denmark, and 
South Germany are democratic and peaceful-minded, 
and these are the countries in which the land is widely 
distributed in the hands of a large number of peasant 
owners. Political power is a reflection of economic 
power, just as it was under the old regime. The 
owning class is the ruling class, and, conversely, the 
ruling class is the owning class. 

31 



32 FEUDAL FOUNDATIONS 

This is why the adoption of constitutions did not 
materially weaken the power of the aristocracy. Its 
economic privileges were left undisturbed by the 
revolutions and political changes that swept over 
Europe during the nineteenth century. Moreover, 
in drafting the constitutions the aristocracy saw to 
it that its economic privileges were not disturbed, 
and that, while a semblance of power was given to 
the people, the real power remained where it was 
before. 

Germany. 

We see the economic foundations of European 
politics in Germany, where the class which owns 
rules. This is frankly inscribed in the constitution. 
It applies to the empire, to Prussia, and to the 
Prussian cities as well. The Junkers who rule Prus- 
sia, and through Prussia Germany, own a great part 
of the land of Prussia, much as the aristocracy owns 
the land of Great Britain. In the southern states 
of Bavaria, Baden, and Wurtemberg peasant pro- 
prietorship is common, and these states in turn re- 
flect the will and, in large measure, the point of 
view of the peasant owning class. Even in the 
Prussian cities the rule is by the propertied classes, 
which, under the three-class system of voting, have 
such a preponderating power at the polls that the 
Socialists and working classes have no voice in the 
administration. The laws of Germany, and espe- 
cially of Prussia, sanction rule by an economic 



FEUDAL FOUNDATIONS 33 

class. This is the underlying motive of Prussian 
statecraft. 

Feudal Land Tenure in Prussia. 

We have seen in the previous chapter how the 
constitution of Germany placed the government in 
the hands of the Junker. And back of the Junker, 
and explaining his power, are the great hereditary 
estates of eastern Germany in East Prussia, Posen, 
and Pomerania, which have been in the possession of 
his family for centuries. It is this that makes Prus- 
sia what she is; it is this that differentiates her from 
the other states of the empire. For Prussia is still 
feudal. The other states abolished or modified the 
feudal system under the influences of the French 
Revolution, when Germany was struggling to re- 
cover from defeat at the hands of Napoleon. But 
Prussia, like England, escaped the French Revolu- 
tion. She was too far away to be influenced by its 
liberalizing influences. There were no cities or cen- 
tres of revolutionary thought. Later, when the re- 
forms of Stein and Hardenburg were promulgated, 
which terminated many of the old feudal abuses, 
the barons in Prussia refused to permit the decrees 
to be known. They successfully checked the advance 
of liberalism, and from that day to this have con- 
tinued the system of landownership of the sixteenth 
and seventeenth centuries. Were the great estates 
of Prussia broken up, were the aristocracy deprived 
of its economic power, then Prussia would reflect 



34 FEUDAL FOUNDATIONS 

the liberalizing and democratic spirit that has fol- 
lowed the distribution of the old estates in France, 
south Germany, Scandinavia, and elsewhere. 

Great Britain. 

England is owned by the landed aristocracy to 
an even greater extent than Prussia. In so far as 
landownership is concerned, England is only less 
feudal than Russia and Austria. 

Great Britain, like Prussia and Russia, escaped 
the French Revolution. This was, possibly, the 
greatest misfortune that ever befell the country. 
There was no day of renunciation, like that of 
August, 1789, in France, when the privileged orders 
gave up their feudal rights; there was no breaking 
up of the great estates, no sweeping away of the old 
abuses. The government remained a government 
of landowners. The church remained an estab- 
lished institution supported by the people, whether 
they willed it or not. There was, and still is, a 
hereditary upper house, whose members enjoy many 
of the political, and most of the economic privileges 
of the eighteenth century. But most important of 
all, the old feudal system of land tenure, of great 
estates and a rack-rented tenantiy remains un- 
changed, as does the caste-like organization of so- 
ciety erected upon it. 

The privileged orders are still exempt from direct 
taxes on their land, as they were in France under the 
old regime; they still enjoy their shooting privileges; 



FEUDAL FOUNDATIONS 35 

they still control their tenants, even though the 
secret ballot obtains. 

The eloquence of Edmund Burke, together with 
the ingrained distrust of France, but most of all the 
existence of parliamentary forms, prevented the 
spread of the revolutionary movement in England. 
The old abuses were preserved. The old privileges 
remained. Nor did the Revolutions of 1830 and 1848 
make the same impression in England that they did 
in many of the other countries of Europe. 

Extent of Land Monopoly. 

Land monopoly is the economic foundation of 
Great Britain. It is the mould of her civilization. 
It has made the nation what it is. Political, social, 
and industrial conditions are the results of land 
monopoly, which is the most pervasive thing in the 
United Kingdom. 

The land is still owned by a very small percentage 
of the people. Even the statistics of ownership, 
startling as they are, fail to indicate the complete- 
ness of the monopoly. According to the Domesday 
Book of 1873, the last authoritative census of land- 
ownership, the total area of the United Kingdom is 
77,000,000 acres, of which 40,526,900 are held in 
2,500 estates. Of the 34,500,000 acres in England 
and Wales 27,500,000 acres, or 80 per cent, of the 
whole, is owned by 38,200 persons. The members of 
'the House of Lords own 15,000,000 acres between 
them. There are 12 peers who own 4,500,000 acres. 



36 FEUDAL FOUNDATIONS 

In England and Wales peers and peeresses own 6,- 
000,000 acres; 1,288 persons own 8,500,000 acres, 
and 2,529 own 4,000,000 more. In Scotland the 
land is even more closely held. A single landlord 
owns more than 1,250,000 acres, while 70 persons 
own one-half the land, and 1,700 nine-tenths of it. 
In Ireland two-thirds of the land is owned by 1,700 
landlords. In the whole of the United Kingdom 
there are 260,000 persons of the 43,000,000 who own 
from one acre upward, as compared with 6,000,000 
peasant proprietors in France, and 720,000 in little 
Belgium. Practically all of the people are tenants, 
subject to competitive rents. 

Probably in no country in Europe is land so 
completely monopolized. Of the 77,000,000 acres 
over 52,000,000 acres belong to persons whose aver- 
age holdings exceed 1,000 acres. 

Many of the landowners are so rich from other 
sources that they do not depend upon their agricul- 
tural estates for an income. They own the land 
under some great city which has come into exis- 
tence during the nineteenth century. They own 
the mines from which they draw royalties. Others 
have married into the family of a rich merchant or 
banker, or found an heiress in America whose fortune 
is used to rehabilitate the estate. The new commer- 
cial aristocracy of traders, bankers, brewers, and 
stock-brokers have acquired estates as a hall-mark 
of standing, while great parts of England and Scot- 



FEUDAL FOUNDATIONS 37 

land are dedicated to sport, to deer and pheasant 
preserves, which are rented out for large sums as 
shooting preserves. England is the only country 
in the civilized world where the land is not pri- 
marily a source of agricultural wealth. Its pos- 
session is a stamp of social distinction. Under 
these conditions, the countryside has been denuded 
of people. Villages are dilapidated and in decay. 
The inhabitants are old men and women, ignorant 
and deferential from suspicion and fear. There is 
poverty, degradation, vice, and drink. The country- 
side suggests a people in despondency and despair. 
Land monopoly and tenancy have yielded their in- 
evitable fruits, just as they did in ancient Rome, 
just as they did in Ireland in the years of the famine. 

Destruction of Agriculture. 

Fifty years ago there were 2,132,000 people em- 
ployed on the land. To-day there are 1,500,000. 
This is in spite of the fact that the soil is rich, and 
England is the best market in the world. The 
market for agricultural produce is many times as 
good as it was before, but in a generation and a half 
the countryside has lost over 600,000 people. Com- 
pared with England, France has 9,000,000, Germany 
10,000,000, and Austria-Hungary 14,000,000 people 
on the land. Measured by another standard, there 
are 40 persons, including farmers and laborers, on 
the soil in Great Britain for every 1,000 acres; 
while in Denmark, where the soil is not so good, 



38 FEUDAL FOUNDATIONS 

there are 70; in the Netherlands 120; and in Bel- 
gium 160 per 1,000 acres. 

Land monopoly is so far the most important fact 
in Great Britain that all other factors are but inci- 
dental to it. It explains the political, social, and 
religious institutions of the people. The constitu- 
tion, which has been copied all over the world, is a 
body of customs and legislative acts growing out of 
the struggles between the Kings and the great land- 
owners. It is primarily a charter of aristocratic 
privileges, rather than of popular rights. 

Caste. 

The stratification of classes, as well as the social 
and political power of the ruling classes, is based 
on land monopoly. To it is traceable the unjust 
distribution of wealth, the terrible poverty of the 
millions, and the idle luxury of the few. Even the 
psychology of the people — the acceptance of class, 
the veneration of title, the humility of the peasant 
and the worker, the attitude of the voter in munic- 
ipal and national elections — is a product of the rela- 
tion of the people to the land. In land monopoly 
the life of Great Britain is mirrored. It explains 
the Irish question, for the House of Lords and the 
great estate owners in the House of Commons own 
the land in that unfortunate isle. It explains edu- 
cation, both elementary and higher, for up to very 
recently this was in the hands of the church, and 
through the church of the aristocracy. 



FEUDAL FOUNDATIONS 39 

The Church of England is based on land mo- 
nopoly, for the church is a great landed proprietor, 
while the dignitaries and clergymen are private or 
political appointments. The army is officered by 
the aristocracy, and the resignation of a group of 
officers during the Irish imbroglio indicates the ex- 
tent to which the aristocracy was willing to go in 
the support of its class interests. Even the party 
system is a product of the landed system. The 
Conservative or Unionist party is almost exclusively 
landed. It has never voluntarily granted any mea- 
sure that in any way interfered with its privileges 
or that imposed any burdens on the land. So, 
too, is the law and the administration of justice. 
The great lawyers find their clients among the 
landed gentry. They in turn find their way to the 
bench, while the highest court of appeals is the 
House of Lords, which by reason of its environ- 
ments, traditions, precedents, and membership re- 
flects the point of view of the ruling class. 

One cannot understand Great Britain without 
fully understanding its economic foundations. For 
the class which owns the land has made England 
what it is. It controls the government and the laws 
of the land. For six centuries it has stamped its will 
and its economic interests on the life of the nation. 

Austria-Hungary. 

The ruling class in Austria-Hungary is also the 
landowning aristocracy, descended from the feudal 



40 FEUDAL FOUNDATIONS 

classes of the eighteenth century. A large part of 
the country is divided into great estates. There is 
not a single district in Lower Austria, Bohemia, 
Moravia, or Silesia that is not dominated by the 
aristocracy. In Bohemia 776 families own 35.6 per 
cent, of the total area. In Hungary the same 
conditions prevail. Altogether the aristocracy, the 
church, and the towns own 40 per cent, of the land 
of Hungary. Several estates comprise more than 
140,000 acres, while some exceed 500,000 acres. 
Nobles of the second rank own 14 per cent, of the 
land, 1 while the crown of Austria is the owner of 
3,650,000 acres, and the church of 1,250,000 acres, 
which are leased to peasants. The latter cannot 
be sold or burdened with debt. Entailed estates 
amount to 2,850,000 acres. The independent peas- 
ant proprietor is disappearing in most parts of 
the country, either through continued subdivisions, 
which make cultivation unprofitable, or through 
absorption by the larger estates. 

Hungary has a substantial peasant proprietor 
class which is well-to-do, sturdy, and independent. 
This class has a good standard of living, and lives 
in comfortable homes. It was the sturdy peasant 
home-owners who won the independence of Hun- 
gary from Austria. It is they who keep alive the 
spirit of independence of the race. But even in 
Hungary the great estates are increasing in size, 

1 Colquhoun, The Whirlpool of Europe, p. 119. 



FEUDAL FOUNDATIONS 41 

and the Magyar is being driven to America, and 
his place taken by Wallachs and Slovaks, races of 
a lower standard of living and less independence of 
character. For the dream of the Magyar is home- 
ownership. Denied that, he becomes restless and 
emigrates to other lands. 

The Germans comprise only about one-fourth of 
the population, but they own most of the wealth. 
The confiscated estates have from time to time been 
bestowed upon them, while the laws discriminate in 
their favor. The Bohemian nobles, who are mostly 
of German descent, and who have been imposed as 
landlords upon the native Czech population whose 
lands have been taken from them, are among the 
most reactionary in Europe. 

Russia. 

The ruling caste in Russia is the landowning no- 
bility, as it is in Prussia, England, and Austria- 
Hungary. No other class enjoys any distinction. 
The landed caste is relatively small. It comprises 
possibly 200,000 families in a population of 170,000,- 
000. Of the great estate owners, there are 114,716 
with estates ranging from 15,000 to 20,000 acres in 
the north of Russia, where much of the land is in 
forests, to estates of from 3,000 to 4,000 acres in the 
steppe region. 1 In western and great parts of south- 
ern Russia more than half of the land belongs to 
the aristocracy, and in other districts almost as 

1 Francis F. Palmer's Russian Life in Town and Country. 



42 FEUDAL FOUNDATIONS 

large a proportion. And this is fifty years after 
the abolition of serfdom and the distribution of 
350,000,000 acres of land of the proprietors to the 
serfs and the peasant communities. 

France. 

It is not strange that government should be the 
instrument of the class which owns in the countries 
enumerated. It is strange, however, to find the 
same principle operative in democratic countries, 
where widely distributed landownership has brought 
with it political control by the people. 

Here as elsewhere those who own rule, and those 
who rule also own. The principle is not confined 
to the autocratic countries; it applies to the demo- 
cratic ones as well. We find democracy in Switzer- 
land, Denmark, Holland, the Scandinavian coun- 
tries, and France, in all of which countries the great 
estates have been broken up, and the land has been 
widely distributed. In these countries the French 
Revolution completed its work, which was the de- 
struction not only of the political but of the economic 
power of the feudal barons as well. Their land was 
taken from them, sometimes by decrees, sometimes 
by purchase. But whatever the method employed, 
democracy has followed peasant proprietorship 
wherever it has been introduced. Even in South 
Germany, where peasant proprietorship is the rule, 
we find a very different political attitude from 
that of North Germany. There is little caste, and 



FEUDAL FOUNDATIONS 43 

the power of the old ruling class is materially 
weakened. 

The breaking up of the great estates was the real 
work of the French Revolution. Prior to the Revo- 
lution there was only a small middle class in France. 
The nobility and the church owned the land. They 
had enclosed the common lands of the people, just 
as they had in England. The peasants paid almost 
all of the taxes and were oppressed at every turn. 
The nobles resisted all change and defeated every 
reform. In their blind pursuit of their own inter- 
ests they were indifferent to the fate of France. 

Extent of Landownership. 

The Revolution put an end to the old land system. 
That was its great achievement. It made the 
peasants landowners. It expropriated the estates 
of the nobles and the church. Reaction followed 
under the Bourbons and Napoleon III, but the peas- 
ants kept their land. And they are France just as 
the Junkers are Germany. Peasant proprietorship 
is the economic foundation of politics. It explains 
French democracy. The peasant is tied to his land 
by affection and ownership. This makes for patri- 
otism. It has been a sheet-anchor for peace. For 
the French peasant is antimilitarist, as is France as 
a nation. Small landowners are found in every 
part of the republic. They work hard for a living, 
but are thrifty, frugal, and very independent in all 
things. They are very different from the agricul- 



44 FEUDAL FOUNDATIONS 

tural laborers of England, or the Bauern of Prussia. 
The estates are not large. They run from 5 to 50 
acres. By the middle of the last century there 
were 10,860,000 separate properties in France, sup- 
posed to belong to 6,000,000 proprietors. And this 
number has since been materially increased. Prob- 
ably 25,000,000 of France's 48,000,000 people have 
an interest in the land. 

The wealth of France has increased at a rapid rate 
in recent years. It is a product of peasant owner- 
ship. The peasant is an efficient farmer. He takes 
pride in his work. It was estimated by the United 
States Treasury Department, in 1906, that there was 
twice as much gold per capita in France as in Great 
Britain. It is the peasant who finances the nation. 
He finances the foreign investments of France as 
well. And he is the sheet-anchor of the nation, irre- 
spective of parties, groups, or ministries. Not that 
peasant proprietorship is an ideal or the French 
peasant a person to be unreservedly envied. Ex- 
cessive subdivision and the hunger for land have 
created conditions and qualities of mind which still 
leave much to be desired. 

In France the people rule. They have little of 
the foreign aggressiveness of England and Ger- 
many. They embrace peace proposals, and were 
it not for the menace of Germany, and the mem- 
ory of Alsace-Lorraine, the entire nation would 
welcome any movement for disarmament and 



FEUDAL FOUNDATIONS 45 

the establishment of foundations for permanent 
peace. 

The Warring Classes Are the Owning Classes. 

Here is a political fact of the first importance, a 
fact of which the historians and the political writers 
make no mention. The aristocracy rules because it 
owns. And it owns because it rules. It uses its 
political power to fasten its privileges on the people, 
and then uses its privileges to maintain its political 
power. It shifts the taxes onto the poor by indirect 
taxation. Everywhere it prevents the taxation of 
land, as it did under the ancien regime. 

Wherever we have feudal land monopoly there 
we have militarism; wherever the land is widely 
distributed, there the desire for peace is uppermost. 
The peaceful countries of Europe are the democratic 
countries, and they in turn are democratic not be- 
cause of any inherent quality in the people, but be- 
cause of the fact that the people have a stake in 
the land. It is the feudal classes that make war; 
it is they who send the worker and the peasant to 
extend the boundaries of the state; it is they who 
load their government with increasing armament, 
to be paid for by taxes on the poor. In the feudal 
countries the people have little voice, and they have 
little voice because they have no economic place or 
power in the country. 

Peace and war have an economic foundation. If 
we could end autocracy the way would be open to 



46 FEUDAL FOUNDATIONS 

permanent peace. And if we could end the feudal 
system, and complete the work which the French 
Revolution started out to accomplish, then democ- 
racy would follow, as it has in every country in 
Europe where the feudal system was abolished, and 
the land distributed among the people. 



CHAPTER IV 
SECRET DIPLOMACY 

The control of foreign affairs is still the privilege 
of the old aristocracy as it was in earlier centuries, 
when the ambassador was the personal envoy of the 
King. Foreign alliances for the most part are not 
determined by the likings of one people for another; 
they are determined by the relations of the aris- 
tocracy to one another. Foreign and]diplomatic ac- 
tivities are based on this assumption. Nations may 
be plunged into war by reason of the power, ambi- 
tion, temperament, the favors or slights to which 
some representative of the nation may be subjected. 

Alliances are often accidental. They are dif- 
ficult to reconcile. Democratic France is linked 
with despotic Russia. Up to eighteen months ago 
Teutonic Germany was united with Latin Italy, 
whose national affinities are with France. England 
and France are only recent friends, a friendship 
promoted by King Edward and Sir Edward Grey. 
For centuries they were enemies. Russia and Japan 
were engaged in a war conflict only a few years 
ago. To-day their diplomatic correspondence is 
couched in endearing terms. Russia and England 
had been enemies for generations, each thwarting 

the other in every move in the East. For years 

47 



48 SECRET DIPLOMACY 

Turkey was the ward of Great Britain. She is now 
under the protectorate of Germany. Lord Salis- 
bury aimed at closer relations with Germany, and 
believed that the best interests of Great Britain lay 
in that direction; while Sir Edward Grey, the present 
foreign secretary, and King Edward brought about 
the present entente cordiale with France. A few 
years ago Bulgaria looked to Russia as her liberator, 
and a statue of Alexander II was erected at Sofia 
to symbolize the relationship. Now Bulgaria is at 
war with Russia. In none of these engagements 
were the people consulted or their likes and dis- 
likes considered. By reason of an election, the 
chance selection of a foreign minister or an am- 
bassador, by some blunder, misunderstanding, or 
personal pique, the friends of to-day face one an- 
other in the trenches to-morrow, while the tradi- 
tional relations of a generation are brushed aside 
as of no more consequence than a scrap of paper. 

Diplomacy a Mediaeval Survival. 

By tradition diplomacy is generally given over 
to the aristocracy. The expense involved in "rep- 
resenting" a country at a foreign court, in main- 
taining its dignity, makes it necessary to intrust 
the diplomatic service to the rich and aristocratic 
classes, who are the eyes and ears of the nation in 
its contact with foreign powers. The people only 
see what the foreign office and the diplomatic corps 
permit them to see. 



SECRET DIPLOMACY 49 

This is part of the medisBval idea of the state. 
Diplomacy has always been the prerogative of the 
upper classes. It is jealously retained and given 
a sacrosanctity, a social character, that closes its 
doors to any other class. The secretary of foreign 
affairs always comes from the old nobility, and in 
England he is almost always a peer. The diplo- 
matic service is only open to the well-to-do classes. 
Admission is by nomination, not by competition, 
and wealth is of course a prerequisite. Candidates 
for the diplomatic service in England are required to 
have an income of at least $2,000 a year. Young 
men who aspire to a diplomatic career dare not 
move in any but the "best" society. By training 
and detachment they know only the ambitions, in- 
terests, and wishes of the ruling caste. They move 
in a world of sports, of society, of dinners, receptions, 
and eighteenth-century ideas. They have no knowl- 
edge of or interest in the people as a whole. They 
are a caste apart. It is almost vain to hope for in- 
ternational peace and fraternity, says an English 
writer, "while the ambitions, the prejudices, and in- 
terests of their governing caste dictate their move- 
ments and govern their intercourse." 1 

America has accepted many European ideas of 
diplomacy. Ambassadors are almost always chosen 
from the rich and privileged classes. Selections are 
made by appointment rather than by competition. 

1 Brailsford, The War of Steel and Gold, p. 154. 



50 SECRET DIPLOMACY 

The salaries paid are inadequate to maintain the 
dignity of the nation and, in consequence, diplo- 
matic posts are frequently used as spoils to be dis- 
tributed to contributors to the party campaign. Our 
representatives to foreign states are often scarcely 
less detached from the people than are the represen- 
tatives of the European powers. 

Even the language of diplomacy is a jargon quite 
likely to confuse the meaning of conversations or 
correspondence. It is the language of an earlier 
age. There is endless etiquette to be scrupulously 
observed. "Ridiculous as it may seem," says an 
English writer, "disregard of the intricacies of 
etiquette, the utterance of a tactless phrase, or 
loss of temper on the part of an individual repre- 
sentative may quite well produce a rupture of dip- 
lomatic relations. It is not difficult to see that in 
this sort of atmosphere countries become mere 
pawns, diplomacy becomes a highly specialized 
game, and, while secrecy and intrigue are prevalent, 
guiding principles are obscured or lost sight of." 1 

The London Times, representative of the most 
imperialistic sentiment of Great Britain, protests 
against the anachronism of mediaeval diplomacy. It 
says: 

"Who, then, makes war? The answer is to be 
found in the chancelleries of Europe among the 
men who have too long played with human lives 

1 Parliament and Foreign Policy, Arthur Ponsonby, M. P., p. 6. 



SECRET DIPLOMACY 51 

as pawns in a game of chess, who have become so 
enmeshed in formulas and the jargon of diplomacy 
that they have ceased to be conscious of the poign- 
ant realities with which they trifle. And thus war 
will continue to be made until the great masses who 
are the sport of professional schemers and dreamers 
say the word which shall bring not eternal peace, 
for that is impossible but a determination that wars 
shall be fought only in a just and righteous and vital 
cause." 1 

Secrecy in Foreign Affairs. 

It is part of the game of international relations 
that the people should be kept in the dark; that 
they should know nothing of treaties, of alliances, 
of diplomatic intercourse, or of the contracts and 
obligations of one country with another. During 
the administration of Mr. Taft the State Depart- 
ment was actively engaged in promoting the trade 
and financial opportunities of America in South 
America and China. This policy looked particularly 
to the sale of battleships to South American repub- 
lics and the participation of American financiers 
in the Chinese and other foreign loans. The policy 
adopted was familiarly known as "Dollar Diplo- 
macy." The people had no interest in the negotia- 
tions. That these agreements might have entangled 
us in serious controversy with China, Japan, and the 
great powers bent on obtaining control of China 
there is no doubt. Up to the present administration 

1 The Times, November 23, 1912. 



52 SECRET DIPLOMACY 

the relations of this country with Mexico have been 
motived largely by the same interests. Railroad, 
mining, oil, copper, and land grants were the object 
of American concession seekers, and on several oc- 
casions the government was urged to intervene for 
the protection of American interests which were of 
a very questionable kind. 

English Foreign Affairs. 

Foreign policies rarely figure in an election. They 
are not discussed before the voters, except by the 
jingo agitators. An appeal was made to the coun- 
try in the midst of the Boer War, but the die had 
been cast and there was no retreat except by the 
admission of defeat. Nor is there any presentation 
of foreign affairs to Parliament. Even in the United 
States treaties are discussed in executive session by 
the Senate. Under the English cabinet system for- 
eign affairs are in the hands of the foreign secretary, 
and if he is a dominant personality, as most of the 
foreign secretaries are, he probably meets with no 
opposition from his colleagues, who are not only 
immersed in the affairs of their own departments, 
but are compelled to rely upon the foreign secretary 
for information and to accept his interpretation of 
the information. Parliament may indeed "heckle" 
the foreign secretary, but he need not reply. It can 
refuse to grant supplies or vote a lack of confidence, 
but to do this would impugn the party in power and 
involve the honor of the country. No opposition 



SECRET DIPLOMACY 53 

party is likely to do this, especially as the Tory 
party is essentially imperialistic in policy, while 
the Liberal party is largely interested in invest- 
ments and trading concessions, that are at the 
present time one of the main causes of war. If the 
cabinet has decided upon war, Parliament can do 
little but vote the money for it, as it is probably too 
late to go back. 

It has become the custom for all parties to agree 
on the government's foreign policy, in order to 
secure "continuity." Some Liberals objected at 
first to the Russian alliance, but the protests were 
ineffective. Moreover, Parliament usually does not 
sit from August to February. It is thought that the 
Boer War might have been averted had Parliament 
been in session in October, 1899. 

Palmerston, who was foreign secretary for a long 
period in Queen Victoria's reign, was one of the 
most reckless of English diplomatists. It was he 
who conceived of the doctrine of protection to for- 
eign investments, which has since been accepted by 
all of the great powers and has become the founda- 
tion of financial imperialism described in subsequent 
chapters. 

Even under the present liberal ministry, we 
find foreign relations largely personal. Mr. Lloyd 
George's famous Mansion House speech in 1911, 
in which he warned Germany that England was 
ready to unite with France in the Morocco dispute, 



54 SECRET DIPLOMACY 

was admittedly delivered without the consent of the 
cabinet or of Parliament. Asquith, Sir Edward 
Grey, and Lloyd George were the only men con- 
cerned in its preparation. 

The Wars of Germany. 

The recent wars of Germany have been the result 
of personal or national aggression. Bismarck forced 
war upon Denmark in 1864, and later upon Austria, 
in 1866. The war against France was precipitated 
by Bismarck by a change in the phraseology of a 
telegram. There had been a long-standing con- 
troversy, following the revolution of 1868, as to 
the nomination of a ruler over Spain. Benedetti, the 
French ambassador to Prussia, was instructed to go 
to Ems, where King William was spending the sum- 
mer, and make formal demand that the Hohenzollern 
candidacy, which Bismarck was pushing for the 
throne, be withdrawn. At the time neither Napoleon 
III nor William I desired war. The other European 
powers also tried to keep the peace between France 
and Prussia. On July 12, 1870, the candidacy of 
Prince Leopold was announced to have been with- 
drawn by his father. 

Bismarck's policy of aggression had received such 
a definite check that he felt himself humiliated. He 
considered resigning. The French ministry, sup- 
ported by the war party, thought the time favorable 
for further concessions from Prussia. This effort 
gave Bismarck an opportunity, which he used ruth- 



SECRET DIPLOMACY 55 

lessly and joyously to provoke the French to declare 
war. 

A new demand was made upon the King of Prussia, 
that he should promise that the Hohenzollern can- 
didacy should not be renewed. The demand was 
presented to the King at Ems by the French am- 
bassador and was courteously refused. A meeting 
of the French ministry that evening decided that the 
refusal was not a cause for war. 

King William sent Bismarck a telegraphic descrip- 
tion of the events of the day, with permission to 
publish it at his discretion. Bismarck saw his op- 
portunity. He so condensed the telegram and so 
changed its tone that the relations between Prussia 
and France seemed to have been abruptly termi- 
nated. In this form he gave the telegram to the 
press. The Prussians thought their King had been 
insulted, the French that their ambassador had 
received a rebuff. The publication of the muti- 
lated despatch acted, as Bismarck intended that it 
should, "as a red flag to the Gallic bull." 

Other Diplomatic Aggressions. 

The Crimean War was a diplomatic war, brought 
on by the pique of a diplomatic official. It could 
probably have been avoided had the right man been 
sent to Turkey as England's ambassador just before 
the outbreak of hostilities. Instead of that, the 
bellicose Lord Stratford de Redclyff e was despatched 
to the post. His presence served to increase the ten- 



56 SECRET DIPLOMACY 

sion between the Porte and the Russian representa- 
tives. Lord Stratford de Redclyffe came with a per- 
sonal grievance against the Czar, who twenty years 
before — in 1833 — had refused to receive him as Eng- 
land's ambassador. The nobleman openly declared 
to Lord Bath, before going to Constantinople in 
1853, that he should now have his revenge against 
the Russian Emperor by fomenting war. 1 And four 
English noblemen in the cabinet decided for war: 
Lord Aberdeen, the prime minister; Lord Clarendon, 
the foreign secretary, and Lords Russell and Palmer- 
ston. The commoners in the cabinet had no part in 
the matter. 

Delcasse in France concluded a secret treaty with 
Spain in 1904, relating to the partition of Morocco 
between France and Spain, which was unknown to 
the French people till after the crisis of 1911. It 
was finally revealed through the enterprise of a 
Parisian newspaper, in spite of the fact that the 
French constitution calls for the laying of treaties 
before the chamber as soon as the interests of the 
state shall allow. By the terms of the treaty Del- 
casse - conceded to Spain a sphere of influence cov- 
ering roughly about one-quarter of the Moroccan 
Empire, extending to within thirty miles of the 
capital at Fez, and embracing nearly the entire 
Mediterranean coast of Morocco and part of the 
Atlantic coast. The British Government knew of 

1 Escott, The Story of British Diplomacy, p. 315. 



SECRET DIPLOMACY 57 

the treaty, but neither the President of the French 
Republic nor Delcasse's colleagues had complete 
knowledge of its terms. Delcasse had simply used 
Morocco as a means of gaining the friendship of 
Spain in his anti-German alliance. It was Del- 
casse's activities in Morocco that brought about 
the visit of William II to Tangier and started the 
whole tension over Morocco. When Spain put for- 
ward her claims during the Franco-German crisis 
of 1911, the French people thought that country 
was merely fishing in troubled waters, so little did 
they know of what had really taken place. 

Only within recent years has there been any 
questioning of secret diplomacy or the power of 
foreign officials. It has been accepted as part of 
an inviolable order of things. Occasionally a pro- 
test comes from interested parties or the opposi- 
tion press, but the protests have but little weight 
with the government or with public opinion. 

Mr. W. H. Massingham wrote a few years ago: 

"A Liberal government has been in office for six 
years. During that period the foreign secretary 
has not made one full, candid, and informing state- 
ment to the House of Commons as to the principles 
of our foreign policy, the nature of the arrangements 
we have made with the other great powers, or our 
action in specific events of the highest consequence." 

The Press and Foreign Policy. 

Nowhere does the press exercise such a baleful 
influence as in foreign affairs, and nowhere does its 



58 SECRET DIPLOMACY 

ownership mould the news and make public opinion 
with less candor. It alone is the source of public 
information concerning foreign relations; here al- 
most alone can it speak without fear of contradic- 
tion. That portions of our press were largely re- 
sponsible for the hostile feeling against Spain in 
1898 no one will deny. The German and Eng- 
lish press is notoriously imperialistic and chau- 
vinistic. 

The press is related to the great financial houses 
and owning classes, which in turn are in close alli- 
ance with the munition makers. In some of the 
countries of Europe the munition makers own or 
control papers in the interest of increased ar- 
mament, while all of the munition makers are 
active in their press propaganda for preparations 
for war. 

In Berlin, Paris, and Vienna many of the impor- 
tant papers are owned by large financial houses, 
who use them to form public opinion and through 
it affect the money market. In England, too, there 
is a close alliance between finance and the press. 
The proprietors of the papers are powerful capital- 
ists, and are sometimes interested in foreign in- 
vestments or armament industries. The papers 
depend for their news of state affairs upon ministers, 
high officials and financiers, and organizations in- 
terested in forming public opinion. The excite- 
ment which caused the Boer War was largely caused 



SECRET DIPLOMACY 59 

by the agents of the South African capitalists and 
their correspondents in the London papers, whose 
reports were duly echoed in the provincial press. 
If a paper opposes their policy of aggression, power- 
ful interests withdraw their advertising and de- 
nounce the paper for lack of "patriotism." For it 
is easy to call a peaceful, conservative attitude un- 
patriotic. As for the great body of readers, they 
have not sufficient knowledge of such matters to 
care what their paper says about foreign affairs; 
and even if they do not agree with its attitude, they 
do not boycott it for that reason. 

All of the machinery of organized society is really 
arrayed on the side of militarism. Public and 
private agencies, which command a hearing, are or- 
ganized against any popular control of the govern- 
ment in the gravest affairs of the nation. Aris- 
tocracy controls the foreign office and enjoys an 
exclusive place in the diplomatic service. It makes 
treaties and alliances; its actions are not reviewed 
by Parliament, and are often not even a matter of 
cabinet decision. The press is closely allied with 
the ruling classes. Papers are either owned or con- 
trolled by the financiers and munition makers, or 
are sympathetically inclined to an aggressive for- 
eign policy. In Germany, Russia, and Austria- 
Hungary the press is under the strictest surveillance 
and censorship, and is often used by ministers and 



60 SECRET DIPLOMACY 

the ruling class for the moulding of public opinion 
and the maintenance of the militaristic regime. 

This is the permanent war caste that keeps Eu- 
rope in a war ferment and still thinks in terms of 
an earlier, feudal age. 



CHAPTER V 
SURPLUS WEALTH 

The political and social structure of the great 
powers of Europe, with the exception of France and 
Italy, is still much as it was in the eighteenth cen- 
tury. Despite the political and industrial revo- 
lutions of the nineteenth century the old aristocracy 
has retained much of the power and many of the 
privileges of an earlier age. It is far richer than it 
was a century ago. It has the same cohesion. It 
makes common cause against democracy and clings 
tenaciously to all of its powers. The land is still 
closely held. In most of the warring countries 
entail still exists. The church is part of the system 
as is society. Government remains a council of the 
old nobility modified by such concessions to the 
business classes and democracy as necessity has de- 
manded. The foreign office and diplomacy are 
agencies of class government conducted in secret and 
on eighteenth-century principles while the making 
of war is still lodged with the feudal classes as it 
was in earlier centuries. 

This is the background of Europe. But war is 
no longer the result of the ambitions or aggressions 

61 



62 SURPLUS WEALTH 

of the feudal class as such. Personal wars, dynastic 
wars, even nationalistic wars ended with the wars 
of Bismarck against Denmark, Austria, and France. 
New forces have come into play that have super- 
seded the war forces of earlier times. The nine- 
teenth century closed an era as completely as it 
closed a century. It coincided with the birth and 
development of industry which had its beginning in 
the first half of the nineteenth century but which 
did not reach its international manifestation until 
the end of the century. Just as the factory sys- 
tem changed the face of England, so surplus wealth, 
increasing rents and profits, and the internation- 
alism of credit changed the face of the world and 
brought about a conflict of economic interests of 
which the present war is the culmination. 

These changes have altered the motives of na- 
tionalism, they have changed the issues of diplo- 
macy, they have created a new ruling class. 

The Birth of Imperialism. 

The beginning of the new imperialism is to be 
found in: 

1. The rapid increase in the rents and royalties of 
the landowning aristocracy, due to the growth of 
industry and urban population. 

2. The development of combinations, syndicates, 
and monopoly in almost every line of industry. This 
has increased profits and freed the stockholder from 
the necessity of personal oversight of his business. 



SURPLUS WEALTH 63 

It has increased the surplus capital seeking invest- 
ment. 

3. The concentration of the investing capital of 
the world in London, New York, Paris, Berlin, 
Vienna, Amsterdam, Frankfort, and elsewhere, and 
the control of the same by powerful financial groups 
in these centres. 

These changes have worked a revolution in soci- 
ety, a revolution comparable to that which followed 
the opening up of new trade routes from Constan- 
tinople to the Atlantic by way of the trading cities 
along the Danube and the Rhine. It is comparable 
to the shifting of the centre of civilization from 
about the shores of the Mediterranean Sea to the 
Atlantic Ocean following the discovery of America; 
it is comparable to the discovery of gold and silver 
in Mexico and South America and the consequent 
breaking up of the old relationships based upon 
barter and custom, and the substitution of a money 
economy instead. And these changes have come so 
suddenly that those who now control the tremendous 
financial powers created are scarcely aware of the 
revolution that has taken place, or of the terrible 
consequences which have been, and are being, 
wrought to the peace of the world as a result of the 
power which has been placed in their hands. 

These changes have concentrated power as at no 
time in the history of the world. They have widened 
the field of conflict until it includes the most obscure 



64 SURPLUS WEALTH 

spots of the globe. In these changes and the con- 
sequences which flow from them are to be found 
the causes of war and preparations for war, the ir- 
ritations and the jealousies, the suspicions and the 
controversies, even the present cataclysm which has 
convulsed all Europe in blood. 

This change, too, has merged the old aristocracy 
of land with the new aristocracy of finance. It 
has created a new ruling class. 

The Beginnings of Surplus Capital. 

Surplus capital seeking investment appeared first 
in Great Britain for perfectly obvious reasons. 
Here the industrial revolution first made its appear- 
ance. It enriched the country from trade and 
commerce. Here banking was most highly de- 
veloped. London was the financial centre of the 
world for years before the money markets of Paris, 
New York, Berlin, and Vienna were of any conse- 
quence. All these industrial changes increased the 
wealth and the income of the landowning classes; 
for they increased the value of the land upon which 
the increasing population had to dwell. And it was 
the ground-rents of the old aristocracy, which owns 
most of the land of Great Britain, that provided the 
surplus wealth that overflowed into foreign lands 
in search of investment at the high rates of interest 
which new countries offered. 

Great Britain, as has been stated, is still divided 
into great estates, which have descended to the 



SURPLUS WEALTH 65 

present owners from very early times. Less than 
2,500 families own 40,000,000 acres, or more than 
one-half of the land. Some of the estates exceed a 
million acres in extent. Outside of the landed 
aristocracy there is almost no freehold ownership, 
such as prevails in France and the United States. 
Practically everybody is a tenant, paying ground- 
rent to a ground-landlord. This is true even in the 
cities, for the land underlying the cities has remained 
part of the landed estates of the old nobility. And 
the great bulk of their incomes comes not from 
agricultural holdings but from urban land upon 
which four people out of five in Great Britain dwell. 
England is the only country in the world where the 
feudal system was not abolished as to urban land. 
And at the present time nearly 35,000,000 people 
are crowded into towns, where they live under a 
system of ground-rents like those collected by the 
Astor estate in New York. Nine families and estates 
own a great part of the land underlying London. 
Individual men own the land covered by cities con- 
taining hundreds of thousands of inhabitants. And 
it is from city ground-rents that the colossal incomes 
of the aristocracy come. In recent years many of 
the leases made fifty and possibly a hundred years 
ago have fallen in, and the ground-rents have been 
greatly increased. This, added to the concentration 
of people in cities, has greatly increased the wealth 
of the aristocracy. 



66 SURPLUS WEALTH 

No one knows the amount of the rents of the 
British aristocracy except as disclosed in the in- 
come-tax returns, for the land has not been valued, 
even for taxation, since 1692. It is probable that 
from $20,000,000,000 to $30,000,000,000 of the 
wealth of the United Kingdom is in land values, 
from which colossal incomes are received, which 
probably amount to from $500,000,000 to $800,- 
000,000 a year. 

Other Possessions of the Aristocracy. 

The landed aristocracy not only owns the land, 
it owns the mines, the docks, and, to an increasing 
extent, the houses of the people as well. For the 
mines and docks and houses are appurtenant to 
the land. They have never passed into the hands 
of the commercial and middle classes, as in other 
countries. The aristocracy is also interested in the 
railroads and franchise corporations of the cities. 
When the railroads were constructed the promoters 
had to go to Parliament for special permission for 
each separate line before the grant would be made. 
And the landowners in Parliament made good bar- 
gains for themselves. They charged from $20,000 
to $40,000 a mile for the right of way alone. Since 
then investments have flowed into the railroads 
until they are largely owned by the landowning 
class. 

The banking institutions are also largely owned 
by the aristocracy, as are the shipyards and the 



SURPLUS WEALTH 67 

munition works, from which large dividends are 
earned. Even the right to run a saloon or a public 
house is a landed privilege in England, from which 
the aristocracy derives large rents. The aristocracy 
is also interested in the distilleries and brewing estab- 
lishments, which are closely tied or identified with 
the sites of the public houses. 

Incomes of the Investing Class. 

Colossal incomes are enjoyed by the landowning 
classes from these sources. Added to these are the 
incomes from shipping and commerce, from the 
cotton, woollen, iron, and steel industries which 
have made Great Britain the industrial centre of 
the world. Investments in the colonies contribute 
to the nation's income, as do the mines of South 
Africa, the lands, railroads, and other possessions, 
the grand total of which must amount to thousands 
of millions of dollars each year. And this income 
is concentrated as in no other country in the world. 
Investigations based upon the income-tax returns 
show that one-third of the total income of the 
nation is enjoyed by less than one-thirtieth of the 
entire people. 

In recent years the incomes of the landed classes 
have increased with unprecedented rapidity. A 
great surplus of capital has come into existence that 
could only be invested at home at low rates of in- 
terest. This surplus sought other fields of invest- 
ment. It overflowed into foreign lands to be in- 



68 SURPLUS WEALTH 

vested in the same kind of property that has given 
such permanence to the aristocracy at home. It 
has been invested in railways, mines, oil, and timber 
concessions, in land grants, in the development of 
new territories. It went into loans to other nations, 
weak peoples, to spendthrift princes, to the placing 
of loans on extravagant commissions in countries 
like Egypt, China, Mexico, Morocco, Central and 
South America. 

In a lesser degree the same evolution has taken 
place in France, Germany, and the United States. 
And with the exception of the United States, over- 
seas investments and financial imperialism are 
traceable back to the growth in the wealth and the 
incomes of the landowning classes. The foundations 
of the new imperialism are to be found in the feudal 
system. 

The Growth of Monopoly. 

The last twenty-five years have also been years 
of rapid monopoly expansion. The movement is 
not confined to the United States. It is common to 
Great Britain, Germany, France, and other coun- 
tries as well. It has extended to nearly all of the 
major industries. With the suppression of com- 
petition profits have increased. These profits have 
not been content with the limited returns of com- 
petitive business. They also sought foreign fields 
where the resources of nature are still unexploited 
and where contracts and concessions make it pos- 



SURPLUS WEALTH 69 

sible to exploit weaker peoples more easily than at 
home. 

Banking and Credit Operations. 

During these years banking and credit transac- 
tions have developed more rapidly than in the 
previous ten centuries. There has been a revolu- 
tion in this field as well as in industry. The 
savings of hundreds of millions of people have ac- 
cumulated in the banking institutions, from which 
they have flowed into the great banking metrop- 
olises of London, New York, Paris, Vienna, and 
Berlin. 

Finance is no longer local. It is no longer national 
as it was fifty years ago. It has become as inter- 
national as the post and the telegraph. Branches of 
the great European banks are to be found all over 
the world. They are owned and directed from the 
capitals of Europe. These banks are agencies for 
the securing of concessions and opportunities for in- 
vestments. They are centres for the strengthening 
of political power. The concessions are financed 
by the banking institutions at home. By these 
means the savings of hundreds of millions of de- 
positors, which run into the thousands of millions of 
dollars, have been made available for the develop- 
ment of the most distant corners of the earth. And 
these banks and financial institutions are closely 
identified with their respective governments. They 
are owned by the ruling classes, and through these 



70 SURPLUS WEALTH 

means are merged with the foreign and domestic 
policy of the government. 

The limited liability company, the corporation, 
the stock exchange for the quotation and the sale 
of securities, the telegraph, and the press have 
widened the boundaries of finance. The value of 
South African or Chinese securities is as accurately 
measured by the investor as was the value of do- 
mestic industry in a small town a few years ago. 

The World a Market-Place. 

The world has become a vast financial market- 
place for the flotation of securities and the pro- 
motion of investments. The colossal incomes from 
rents and royalties, from lands and mines, from rail- 
roads and other forms of monopoly has created a 
surplus of capital that has overflowed into every 
quarter of the globe. And as will be shown in a 
subsequent chapter, the capital so invested amounts 
to approximately $40,000,000,000. These invest- 
ments are most largely owned or controlled by the 
landed and financial classes in England, Germany, 
and France. Through them there has resulted a 
merger of interests between the investing classes 
and the state which has created a new feudal- 
ism on an international scale. It has extended the 
economic and political interests of the ruling classes 
beyond the boundaries of their respective nations. 
Through high finance nationalism has expanded into 
internationalism, and the narrow, dynastic contro- 



SURPLUS WEALTH 71 

versies of earlier generations have been changed into 
overseas complications. Through the investor the 
world has been laid with mines which are a constant 
menace to the peace of mankind. 



CHAPTER VI 
FINANCIAL IMPERIALISM 

This conversion of the old feudal landowner into 
an investor explains in part his identification with 
imperialism, protectorates, and colonies. His iden- 
tification with the financial classes at home identifies 
him with their interests all over the world. And 
this merger marks the beginning of the new im- 
perialism, an imperialism of finance. This is the 
immediate background of war and preparations of 
war, of preparedness, navalism, and the overseas 
interests of the great powers. Earlier foreign 
policies were bent on the maintenance of national 
boundaries and the preservation of the balance of 
power. The new imperialism is interested in 
loans, concessions, protectorates, spheres of influence, 
the closed door, and other privileges arising from 
the financial interests of the ruling classes, which 
have become world-wide in their extent. 

The era of foreign investment for other purposes 
than colonization and the development of trade 
and commerce began in the last quarter of the nine- 
teenth century. It assumed substantial proportions 
in the early eighties and has increased at an ac- 
celerated pace ever since. In recent years investors 

72 



FINANCIAL IMPERIALISM 73 

in nearly all of the great powers, including the 
United States, have been actively engaged in the 
notation of foreign loans, in the securing of con- 
cessions, in the location of mines, the building of 
railroads, the development of oil and timber con- 
cessions, and the acquisition of land grants in con- 
nection with home industries like sugar, tobacco, 
cotton, and other tropical and semi-tropical enter- 
prises in every portion of the world. It is probable 
that the present total investments of all the coun- 
tries engaged in overseas financing and develop- 
ment is not far from $40,000,000,000. Great Britain 
was first in the field and acquired the richest prizes. 
She is the greatest investing nation and has the most 
widely distributed empire and overseas interests. 

Investments of European Countries. 

Describing the vast outpourings of capital from 
European countries during the last few years, C. K. 
Hobson says: 1 

"Great Britain has for some years past never in- 
vested less than 100,000,000 pounds per annum in 
foreign countries, and recently the amount has been 
in the neighborhood of 200,000,000 pounds ($1,000,- 
000,000). The yearly flow of French investments 
to other lands is now estimated by M. Neymarck 
at from 80,000,000 to 100,000,000 pounds sterling; 
German foreign investments, judging from the 
values of securities admitted to quotation on the 
German bourses, must amount to from 40,000,000 

1 The Export of Capital, p. 161. 



74 FINANCIAL IMPERIALISM 

to 60,000,000 pounds per annum; while Belgian and 
Dutch investments must also amount to a consider- 
able sum." 

Mr. Hobson gives the amount of income derived 
in England from foreign investment k as 176,000,000 
pounds in 1913, and 226,000,000 pounds as the 
amount of capital exported in that year. According 
to the Frankfurter Zeitung, capital issues in Ger- 
many for investment abroad amounted to 33,064,- 
000 pounds in 1913. 1 

British Capital Invested Abroad. 

Mr. Mulhall, the English statistical expert, cal- 
culated for the Dictionary of Political Economy 
that England's foreign and colonial investments 
grew from 1882 to 1893 at the tremendous rate of 
74 per cent, per annum. According to Sir Robert 
Giffen, the profits from foreign and colonial invest- 
ment in 1909 amounted to between 90,000,000 and 
100,000,000 pounds, the total capital so invested 
being about 2,000,000,000 pounds. 2 Sir George 
Paish reported to the Royal Statistical Society that 
the income from these sources in the year 1909 had 
risen to 140,000,000 pounds. By 1914 the total 
amount of British capital invested abroad was 
about 3,500,000,000 pounds sterling. 3 

Mr. Edgar Crammond, an English writer, gives 
the amount of British capital invested overseas, 

1 Idem., pp. 204, 246. 2 Imperialism, Hobson, J., p. 59. 

» The Export of Capital, Hobson, C. K., p. 37. 



FINANCIAL IMPERIALISM 75 

and says that it will be of material aid to Great 
Britain in the present war, since it is invested for 
the most part in countries far from the scene of the 
conflict. 1 He places the aggregate value of Great 
Britain's overseas investments at approximately 
3,900,000,000 pounds (nearly $20,000,000,000), and 
the income therefrom at about 200,000,000 pounds 
per annum. This writer says that even if the earn- 
ings of England's greatest industry — the shipping 
industry — are cut down during the war, the influx 
of wealth from capital invested abroad will not be 
greatly reduced. 

The following tables are given by Mr. Crammond, 
first as to British investments in British possessions 
and colonies, and second in foreign lands: 

BRITISH CAPITAL INVESTED IN BRITISH DOMINIONS, 
COLONIES, AND POSSESSIONS 

Pounds 

India (including Ceylon) 447,000,000 

Australia and New Zealand 408,000,000 

Africa 401,000,000 

Canada 423,000,000 

Other British possessions 91,000,000 

Total 1,770,000,000 

BRITISH CAPITAL INVESTED IN FOREIGN COUNTRIES 

Pounds 

United States 623,000,000 

Argentina 329,000,000 

Brazil 135,000,000 

Mexico 81,000,000 

Japan 74,000,000 

Chile 57,000,000 

Egypt 75,000,000 



Quarterly Review, October, 1914. 



76 FINANCIAL IMPERIALISM 

Uruguay 40,000,000 

China 38,000,000 

Peru 32,000,000 

European countries 170,000,000 

Cuba 29,000,000 

Total 1,683,000,000 

Grand total British possessions and foreign 

countries 3,453,000,000 

This colossal total represents only investments in 
the public undertakings or companies. It does not 
include immense sums invested privately in foreign 
countries in land, buildings, etc. Nor does it in- 
clude the large amounts of capital employed abroad 
by the great banking, mercantile, and shipping 
houses of London, Liverpool, Manchester, Glas- 
gow, etc., in financing international trade. These 
private investments represent at least 10 per cent, 
of the public investments, or 350,000,000 pounds 
additional. 

The annual revenue of British investors from India 
alone is 30,000,000 pounds sterling, though a large 
part of this is in pensions. Vast sums have recently 
been invested in the Persian oil works. In May, 
1913, the British Government purchased 2,000,000 
shares and 2,000,000 pounds debentures in the Anglo- 
Persian Oil Company, formed in 1909 to work a 
concession covering about 500,000 square miles in 
the southern part of Persia. New shares subscribed 
in limited companies in Egypt alone in the year 1905 
amounted to a total of over 10,000,000 pounds. 1 

1 Brailsford, The War of Steel and Gold, p. 118. 



FINANCIAL IMPERIALISM 77 

Nearly one-half of the capital invested abroad 
goes as loans to foreign and colonial governments, 
the other half is invested in railways, banks, mines, 
lands, etc. 

German Investments. 

Although of late years the German people have 
emigrated in comparatively small numbers, they 
have exported their capital to every quarter of the 
globe. They own the light, power, and transporta- 
tion monopolies of half the capitals of the Latin- 
American countries. They work tea plantations in 
Ceylon and tobacco plantations in Cuba and Su- 
matra. They have made investments in North and 
South Africa, in China, in the Balkans, in Turkey, 
and in Russia. Seven large German banks devote 
themselves exclusively to the exploitation of foreign 
concessions, either owning or dominating enterprises 
of every conceivable character in the regions de- 
noted by their titles, or lending financial assistance 
to German subjects engaged in such undertakings. 

Germany's overseas investments, according to 
Crammond, have a capital value of about 1,000,000,- 
000 pounds. Of this total about 170,000,000 pounds 
have been placed in Russia. German investments 
in Turkey amount to about 40,000,000 pounds; in 
Roumania, 50,000,000 pounds; in the United States, 
150,000,000 pounds; and in South America, 120,- 
000,000 pounds. 1 

1 Quarterly Review, October, 1914. 



78 FINANCIAL IMPERIALISM 

French Investments. 

France is also an investing country on a large 
scale, although the investments of France are largely 
made up of the savings of the peasants and the 
middle classes, who make their investments through 
the banks. French money has financed Russia, to 
which country thousands of millions of francs have 
gone. Immense sums are loaned in Turkey and the 
Balkans, as well as in Egypt, Morocco, and Tunis. 
French bankers co-operated with Germany in the 
Bagdad Railway project, in spite of the protest of 
the government. The total foreign investments of 
France in 1913 were estimated at $8,000,000,000, 
upon which $400,000,000 of interest was received. 

It is probable that the total foreign investments of 
England, France, and Germany alone, and in conces- 
sions and privileges of various kinds, is not less than 
$35,000,000,000. It may exceed this sum. 

Examples of Investors' Profits. 

The profits from overseas investments and the 
exploitation of concessions are far in excess of 
profits at home. This is particularly true in the 
dealings with weaker countries. The Khedive of 
Egypt in 1873 raised a loan of 82,000,000 pounds 
sterling at 7 per cent, interest, and 1 per cent, for 
amortization. The banks that managed the loan 
gave the Khedive only 20,700,000 pounds of the 
82,000,000 pounds, and kept the rest as security, 
besides making him take back 9,000,000 pounds in 



FINANCIAL IMPERIALISM 79 

his own notes on a previous debt, which the bankers 
obtained at 65. 

The banks which financed the building of the 
Bagdad Railway earned 100,000,000 marks as com- 
mission, and besides "saved" 180,000,000 marks in 
the cost of construction, which they nevertheless 
charged to the Turkish Government. At least these 
are the English estimates of the profits of the banks 
in the Bagdad transaction. German estimates of 
profits from the "savings" are somewhat less, but 
the commissions are given as 138,000,000 marks. 
The Sultan of Morocco made a loan of $10,000,000 
in 1904 on which the banks took a profit of $2,500,- 
000, although interest was charged on the entire 
loan. Financial difficulties and the activities of the 
powers compelled further borrowings until, by the 
end of 1910, the total debt of the country was 
$32,500,000 or a net increase in seven years of 
$28,000,000. By the terms forced on the Sultan 
in the loan of 1910 the bonds were issued to the 
banks at 435 francs but were sold to the public the 
same day as their issue at 507 francs. 

These are but typical of the investors' profits 
when dealing with weak and helpless peoples. The 
profits from the Bagdad Railway, the terms imposed 
on China in the five-power loan, the methods em- 
ployed in Egypt, Morocco, Persia, and Turkey will 
be described in later chapters. 

Investments are profitable in countries like Egypt, 



80 FINANCIAL IMPERIALISM 

because of cheap native labor. English labor legis- 
lation does not apply in the colonies. A twelve to 
fifteen hour day is common in the Egyptian ginning 
mills at a wage of 15 to 20 cents per day for an 
adult and 12 cents for a child. 1 In the second place 
countries like China and Turkey are easy to exploit, 
as was proved in the case of Egypt under the Khe- 
dives. The exploiters are not interested in the wel- 
fare of the natives. Only lately has there been 
established a system of elementary schools for the 
peasantry, and these are 'dependent upon private 
benevolence. 

The New Motives of Imperialism. 

The overseas investor has changed the face of 
international politics. He has widened the boun- 
daries of nationalism by extending the jurisdiction 
of his state to his investments wherever they may 
be found. He is largely responsible for the policy of 
imperialism, which, in its militaristic manifestations, 
is the product of the past twenty years. He has 
changed the motive of colonial interests from those 
of the middle of the last century to those which pre- 
vail to-day. 

The overseas investor is the explosive element in 
foreign affairs. He has created the new issues 
which are responsible for the tension, the suspicions, 
the imbroglios of recent years. If we could follow 
the consequences and know all the effects of his 

1 Brailsford, The War of Steel and Gold, p. 114. 



FINANCIAL IMPERIALISM 81 

activities in such international episodes as the 
Morocco incident, the exploitation of Turkey, the 
activities in the Balkans and Persia, where the seeds 
of the present European conflict were undoubtedly 
planted, we should probably be forced to the con- 
clusion that the overseas financier is more largely 
responsible for the present European war than any 
other cause. 

The investor has become merged with the govern- 
ment in the greater powers of Europe. This is 
even true in democratic France. The investing 
classes are the ruling classes; they include members 
of the government, they are influential in parlia- 
ments and assemblies, they are closely identified 
with the foreign office and the diplomatic service. 
A reading of the diplomatic history of Europe for 
the last twenty-five years shows how to the exclu- 
sion of almost everything else the interests of the 
investing class and the concession seeker have 
moulded the foreign policies of the countries of 
Europe. 

By virtue of these conditions international re- 
lations have become very different from what they 
were a generation ago. War has ceased to be what 
it was in the middle of the last century. It is mo- 
tived by new forces. Germany's wars with Den- 
mark, Austria, and France; Italy's wars with Aus- 
tria; England's wars with Russia; all these were 
wars of a restricted nationalism. The new wars of 



82 FINANCIAL IMPERIALISM 

the past twenty years are the results of external 
causes, of overseas interests, of a struggle for con- 
cessions, spheres of influence, of a new kind of in- 
ternationalism in its various manifestations. 

These are the unseen forces which lie back of the 
obvious causes of war. The personal ambitions of 
monarchs and the surgings of peoples play only a 
secondary role. 



CHAPTER VII 

THE FLAG FOLLOWS THE INVESTOR 

The investor ventures forth to new fields only 
when he has his country behind him. Left to 
the ordinary civil proceedings for the collection of 
his debts and the protection of his concessions, he 
would be at a sorry disadvantage with foreign 
states and weaker nations, especially those where 
changes of government are frequent and revolu- 
tions prevail. And many years ago by a quiet, 
unheralded diplomatic coup the doctrine was estab- 
lished that the flag follows the investor. The na- 
tion has become an insurance and collection agency 
for the investing classes. The doctrine only applies, 
however, where weak and defenseless nations are 
involved. It is not called into play against the 
stronger powers. 

The Origin of the Doctrine. 

This is the keystone of high finance. It was laid 
about the middle of the last century when Lord 
Palmerston, then British secretary for foreign af- 
fairs, issued his famous declaration about the 
"rights of protection" to the lives and property of 
British citizens in any part of the world. This 
doctrine was accepted dubiously at the time, but 
it has since become the established practice of the 

83 



84 THE FLAG FOLLOWS THE INVESTOR 

stronger powers. It is the basis of the aggressive 
policy of the investing and exploiting classes. As 
it works in practice, a government is seldom called 
upon to protect the lives of its citizens in foreign 
countries, nor is war often the outcome of any 
indignity to them. And it is, of course, not in- 
voked against a strong power. As applied by the 
investing powers it means diplomatic support and 
official protection to the investments of its capital- 
ists in foreign countries. And behind a nation's 
diplomacy stand its army and its fleet. This doc- 
trine is the mailed fist in international business. 

Palmerston applied his policy for the first time 
in the case of a certain Portuguese Jew who had 
become a British subject, and who had invested 
money in Greece and then brought forward a 
claim against the Greek Government. When the 
claim was not satisfied he appealed to his home 
government, and the appeal resulted in the send- 
ing of ships to Greece, with a peremptory demand 
for settlement of the claim. The government, 
dominated by the personality of its popular but 
reckless foreign secretary, had embarked on a 
"spirited foreign policy." 

This doctrine has made foreign investments 
secure. It has identified the foreign office with the 
banker and the investor and has converted the army 
and the navy into an agency for the enforcement 
of demands and the collection of debts. 



THE FLAG FOLLOWS THE INVESTOR 85 

Some of the Results of the Policy. 

As a consequence of this doctrine the foreign 
office backed by the navy follows the property of 
the investor wherever it may be found. As exer- 
cised by the dominant powers it has become a means 
of oppression, of exploitation, of the destruction of 
the liberties of weak peoples, and the embroilment 
of nations in war and preparations for war. No 
other doctrine of such momentous consequence has 
ever been imposed upon peoples without discussion 
or the consent of ministries, parliaments, or the 
people themselves as the doctrine that the flag fol- 
lows the investor. 

No matter how corrupt the bargain may have 
been, no matter how ruthless the terms imposed, 
no matter how recklessly the loans may have been 
made, no matter how fictitious the claims of the 
government of the borrowing or concession-grant- 
ing country, the letter of the bond is exacted. There 
is no court of equity, no conscience of the king to 
appeal to. The strong arm of the home govern- 
ment, backed by its navy and its army, by its diplo- 
matic service, and its financial influences, is at the 
behest of the investing classes, who in a quarter 
of a century have placed almost every "unciv- 
ilized" corner of the globe under the influence, if 
not the actual dominion, of the great powers of 
Europe. In later chapters we shall see how this 
doctrine has been applied in the subjection of 



86 THE FLAG FOLLOWS THE INVESTOR 

Egypt, Tunis, Morocco, China, Persia, and else- 
where. 

America and "Dollar Diplomacy." 

For the present at least the United States has 
repudiated this policy, although the activities of the 
State Department under Secretary Knox brought 
us perilously near to its acceptance. Under the 
"dollar diplomacy" encouraged by the Taft ad- 
ministration, bankers' loans were promoted with 
Central American Governments whose solvency 
was far from secure. These loans were accom- 
panied with treaties which assured to us the right 
of intervention in the borrowing countries in case 
of revolution. The bankers' loans and the treaties 
which accompanied them converted the United 
States into a guarantor of the interest and the 
principal in case of default, and the guarantee could 
only be made good by diplomatic pressure or armed 
intervention. In case of revolution or war with a 
neighboring country the finances might and prob- 
ably would be so disturbed that the United States 
would be called upon to preserve order or inter- 
vene under the terms of the treaties. It would 
possibly have placed the Central American states 
under our protectorate. Fortunately none of these 
treaties were confirmed by the Senate. Nowhere 
did "dollar diplomacy" succeed. 

Even greater complications were averted by 
President Wilson in the matter of the six-power 



THE FLAG FOLLOWS THE INVESTOR 87 

loan to China, described elsewhere. 1 China was 
compelled by internal necessities to apply for a 
loan to the powers of Europe. The amount of the 
loan finally agreed upon was $125,000,000. There 
was no doubt of the solvency of China, and the 
integrity of the people was such that the loan in- 
volved little real risk requiring the participation 
of the governments of the lending powers. But 
the European governments and the financiers were 
seeking other ends. They wanted concessions for 
railways and mines and a direct participation in 
the internal affairs of China. Russia and Japan, 
both borrowing nations on a large scale, sought to 
participate in the loan so as to be in a position to 
assert political claims in case of intervention. 

President Taft and Secretary Knox urged a syn- 
dicate of New York bankers to participate with 
the bankers of the other great powers in the loan. 
It was urged that this would aid in securing the 
"open door" in China, that it would insure the 
purchase of a portion of the railroad equipment in 
the United States, and otherwise preserve to us a 
share of the trade opportunities of the country. 

The contracts were not completed under the 
Taft administration, and President Wilson, on 
taking office, advised the bankers that our govern- 
ment would not support them in the six-power loan. 
The President said that such participation might 

1 See Chapter XVIII. 



88 THE FLAG FOLLOWS THE INVESTOR 

require us to join with other powers in enforcing 
our claims by force of arms. If China failed to 
meet her obligations, the government would be 
called upon to compel her to do so. The custom 
houses would be seized, for the terms of the loan 
provided that custom taxes were to be set apart 
for the payment of the interest on the debt. Revo- 
lution or a change of government might divert 
the income and require that military pressure be 
put upon the country. China protested against 
the terms. They involved her integrity and na- 
tional dignity, but they were insisted upon by the 
European powers. 

President Wilson recognized the danger involved 
in such a merger of finance and treaty obligations 
and withdrew the support of the administration to 
the project, and in doing so repudiated the "dollar 
diplomacy," on which the country was entering. 

Protection to the investor is a cause of endless 
international complications. It involves prepared- 
ness, a strong navy, and increased military expen- 
diture. Nations are embroiled in controversies. 
They are compelled to watch the advances of other 
nations. The doctrine of Lord Palmerston has be- 
come the keystone of imperialistic finance and 
overseas aggression. 



CHAPTER VIII 

THE MERGER OF FINANCE AND FOREIGN 
AFFAIRS 

Growing out of the conditions described, the Eu- 
ropean powers have become indistinguishably merged 
with the banks, financial institutions, and investing 
classes of their respective countries. They lend 
their influence to schemes of overseas financing, to 
the promotion of loans, to securing railroad, mining, 
and other concessions and for the protection of these 
concessions after they have been obtained. Private 
finance is the entering wedge of overseas dominion. 
The Bank of England, the Imperial Bank of Ger- 
many, and the Bank of France are partly owned 
or controlled by their respective governments. 
Along with these are other powerful institutions 
whose main business is the making of loans and 
seeking concessions These too have the support 
of the government. 

In modern wars or miniature revolutions, says 
President David Starr Jordan, "cherchez la femme" 
might well be changed into "cherchez le banquier." 
According to President Jordan, the late Italian War 
in Tripoli had its motive in part at least in the 
speculations of the Bank of Rome; in the Balkan 

89 



90 THE MERGER OF FINANCE 

War the final victory rested with the French bankers, 
who were able to furnish the war funds and the ar- 
maments at a time when Germany and Austria 
were in financial distress. Turkey in Asia, he says, 
is dominated by the Deutsche Bank, "that nation 
within a nation, which replaces the Sultan as mas- 
ter of the rest of his domain." According to a 
Turkish writer, quoted by him, "this bank drains 
for itself the riches of the land, exhausting not the 
working class alone but a whole nation, which is 
dying from its operations." 1 

The powers are identified with the banks and 
financial institutions in a great variety of ways. 
The governments are heavy and constant borrowers. 
In time of war securities are floated on a gigantic 
scale. As the indebtedness increases the govern- 
ment becomes more and more dependent upon the 
financial groups, which in turn expect assistance 
from the state, both at home and abroad. The 
interlocking of interests takes many forms. Lord 
Beaconsfield purchased the shares of the Suez Canal 
through the Rothschilds. The German Government 
co-operated closely with the Deutsche Bank in se- 
curing concessions for the Bagdad Railway and the 
extension of German influences all over Turkey. 
The French banks were closely related to the activi- 
ties of France in Morocco and Tunis, while the 
five-power loan in China, under the joint protec- 

1 World's Work, July, 1913. 



AND FOREIGN AFFAIRS 91 

tion of the countries participating in it, is a matter 
of recent history. 

Foreign Investment— Effect on Internal Development. 

And these banking institutions, in the pursuit of 
large profits, often shape the internal life of the 
country to its ultimate weakness in foreign affairs. 
This has been the case in France. 

William Morton Fullerton says: 

"In one great modern state in particular, the 
French Republic, eight or nine gigantic establish- 
ments of credit have formed a veritable trust, 
which has tended to kill the minor banks, and, by 
whetting the French middle-class distrust of modern 
democratic social legislation, has cultivated the 
prejudice that French securities are unsafe, and 
thereby so monopolized the employment of the pub- 
lic wealth that France may be said without exag- 
geration to be virtually a financial monarchy. The 
apathy of the French parliament as regards the 
construction of great public works, such as modern 
ports and canals, is often cited as one of the main 
causes of the relative industrial backwardness of 
France, and of the increasing invasion of French 
territory by enterprising German, Belgian, or Swiss 
capitalists. A more potent cause assuredly is the 
fact that a large proportion of French savings are 
systematically exported abroad, on the pretext of 
assisting needy foreign states, while affording safe 
investments to the French ' rentier/ but, in reality, 
with the object of securing monstrous profits which 
benefit only the banks in question, a few inter- 
mediaries, and a certain section of the press, and 
with the result of developing the wealth and the 



92 THE MERGER OF FINANCE 

defensive force of rival peoples, favoring the de- 
population of France, and preparing the gravest 
complications for that country in case of a Eu- 
ropean war." 1 

As a consequence, the bulk of the French invest- 
ments are now in jeopardy in Russia, Turkey, and 
the Balkan states, where thousands of millions of 
dollars have been placed by the bankers attracted 
by the underwriting profits and concessions which 
have enriched the banking syndicate, but not the 
small investor. 

The same unfortunate policy has been pursued by 
Great Britain, in which country internal develop- 
ment has been neglected to the great disadvantage 
of the nation. The railroads have been left in 
private hands. The canals and waterways have not 
been extended. Not until recently have the har- 
bors been developed or the docks constructed on an 
adequate scale. Business has suffered in conse- 
quence of exorbitant freight charges and the foreign 
trade and commerce of the country has been at a 
disadvantage in competition with Germany. The 
banks in Great Britain have been permitted to 
draw the surplus capital of the country away from 
domestic uses. They have placed it in foreign lands 
to the sacrifice of the internal needs of the country. 
Great Britain, as well as France, has been weakened 
by reason of the liberty allowed the financial houses 

1 Fullerton, Problems of Power, pp. 2-3. 



AND FOREIGN AFFAIRS 93 

which have invested the surplus wealth of the coun- 
try in other countries, some of which are now at 
war with Great Britain. 

Germany, on the other hand, kept her surplus 
capital at home. It has been used first for the 
acquisition and extension of the railroad systems 
which have been strategically organized for military 
as well as industrial purposes. The waterways and 
canals have been extended until they ramify into 
every part of the empire. Docks and harbors have 
been built by the states and the cities, such inland 
cities as Mannheim, Frankfort, Cologne, and Dussel- 
dorf, as well as the seaport cities of Hamburg and 
Bremen, being now possessed of the most splendidly 
equipped harbors in the world. Except where 
needed for political or industrial purposes German 
capital has been largely kept at home. It has been 
used for the development of the empire rather than 
in the exploitation of other countries. Large sums 
have been invested in South America, in Morocco, 
in Turkey, in China, but much of this has been 
placed in mining concessions, in railroads, and in 
places where it would be of industrial and political 
service to the nation in case of need. Just as France 
has loaned immense sums to Russia, so Germany 
has placed her overseas loans in those countries 
where they would be of greatest service to the 
empire. For the most part, however, her capital 
has been kept at home. It has been invested in the 



94 THE MERGER OF FINANCE 

great works of internal development as well as in 
the extension of industrial and manufacturing 
plants, in the building of a merchant marine, in the 
big programme of imperial expansion on which the 
best minds of the empire have been engaged for the 
past quarter of a century. 

Interlocking Interests of the Banks. 

The favored banking institutions are also inter- 
locked with a great variety of promotion enterprises, 
for the building of railroads, the development of 
mines, and the exploitation of oil-fields and other 
concessions all over the world. Certain banks are 
devoted almost exclusively to the promotion of 
overseas enterprises. President Jordan says that in 
1904 the Deutsche Bank of Berlin was represented 
by interlocking directorates in 240 different indus- 
trial, transportation, and exploiting companies. 
The Dresdener Bank was represented in 191; the 
Schaffhausenscher Bank in 211, the Darmstadter 
Bank in 161, and the Disconto Gesellschaft in 110. 
These figures, he thought, "might have doubled by 
1913. And each of the banks has branches in 
distant lands over which it has entire control. 
These banks, again, are intimately related with 
the great armament syndicates like Krupps, Schnei- 
ders, Armstrong, Vickers-Maxim, in Germany, 
France, and England. Continuing, President Jordan 
says: 1 

1 David Starr Jordan, World's Work, July, 1913. 



AND FOREIGN AFFAIRS 95 

"In Germany we may fairly regard the Emperor 
as the centre of a gigantic mutual investment organ- 
ization, with its three branches of aristocracy, mili- 
tarism, and finance; all the powers of the state, 
military as well as diplomatic, being placed at the 
service of the combined interests. In so far as other 
nations are powers, the fact is due to the influence 
of similar interlocking combinations. This is cer- 
tainly true in England, France, and Russia, and the 
dollar diplomacy of the United States, now happily 
past, was based on the same fundamental principle. 

"By such means the foreign policy of each of 
these great powers is directed to safeguard the ven- 
tures of those great banks which make a specialty 
of foreign risks. In Europe the governments every- 
where frankly make open cause with the interests. 
The foreign offices are, therefore, for the most part, 
little more than the firm names under which these 
interlocking syndicates transact their foreign busi- 
ness. 

"Whatever the virtues or the evils of the system 
of interlocking directorates, the evils at least are 
greatly accentuated when the government becomes 
a part of the system, extending its operations in 
foreign lands by means of secret treaties, by official 
guarantees, by threats, and by force of arms. A 
large percentage of the international troubles of the 
world arise from this one source, the use of govern- 
mental authority to promote private schemes of 
spoliation." 

Behind the banks and the promoters are other 
financiers and investors who handle securities and 
speculate in stocks. The investors are the most in- 
fluential persons in the country. They are the 



96 THE MERGER OF FINANCE 

great landowners, the railroad operators, and those 
who stand high in official position. They influence 
and control foreign policy; they are represented in 
Parliament. 

The simple organization of the eighteenth cen- 
tury has become very complex. In place of a single 
landed aristocracy, ruling the state, we now have a 
merger, which includes the new aristocracy of 
banking, finance, and industry. 

Professor John Hobson, the English economist, 
says: "Adventure, lust for gold, etc., are the fires in 
the engine of war, but the great financial interests 
direct the engine." * 

1 Hobson, J., Imperialism, p. 65. 



CHAPTER IX 

CONCESSIONS AND MONOPOLIES 

Overseas financing is a merger of four activities, 
all dangerous to the peace of the world. These 
activities are: 

1. The making of loans to foreign nations like 
Russia, Persia, Turkey, and the Balkans, as well as 
to weaker countries like Mexico, China, Central and 
South America. In these loans the governments 
themselves sometimes participate directly, as in 
Persia, Egypt, Turkey, and elsewhere. France 
finances Russia; England her colonies and depen- 
dencies; Germany finances Turkey (with the co- 
operation of other powers); England and Russia 
finance Persia. All of the powers are united in 
China. Sometimes two or more countries co-op- 
erate; occasionally the door is open to all comers. 
But, generally speaking, the financial privileges of 
overseas investments are exclusive. 

2. The securing of concessions for railroads, 

mines, franchise corporations, oil-wells, forests, 

lands, docks, and other resources and opportunities 

to be developed under contracts with the granting 

government and under the implied or expressed 

97 



98 CONCESSIONS AND MONOPOLIES 

protection of the government of the investing coun- 
try. Concessions are usually parcelled out to the 
same countries that control the foreign loans. 

3. The financing and promotion of the sale of 
munitions of war to weaker peoples frequently as 
a condition to the making of a loan, the banking 
institutions being closely related to the makers of 
war munitions. 

4. A close working arrangement and understand- 
ing with the government, and especially with the 
foreign office, as to the terms of the concessions and 
spheres of influence which are recognized as the 
entering wedge for ultimate political control or 
"protection." 

The motive in all these transactions is to secure a 
complete and exclusive monopoly in the concessions or 
territory from which all other financiers and countries 
can be excluded. 

Concessions and Spheres of Influence. 

The development of foreign concessions and the 
making of foreign loans with the commissions and 
other profits on the side are the most profitable of 
all banking opportunities, if we may judge by the 
colossal profits made in Egypt, Turkey, China, and 
Morocco. In weak countries like China, Egypt, 
Central America, South Africa, and Mexico, these 
concessions are granted to individuals or promoting 
companies, and are financed by the banking insti- 
tutions at home. They are secured by contracts 



CONCESSIONS AND MONOPOLIES 99 

which once made have the backing of the home gov- 
ernment under the doctrine of Lord Palmerston, 
referred to in an earlier chapter. China, Turkey, 
South and Central America, and Africa have 
been favored hunting-grounds of the concession 
seekers. 

As a means of strengthening financial control and 
political power, spheres of influence are marked out 
in the granting country. This is the next step in 
overseas imperialism. It is often followed by a pro- 
tectorate or direct colonial administration. This 
usually follows if the interest is not promptly met, 
or if the country shows any signs of restlessness 
under the demands of the financiers or concession 
workers. The sphere of influence insures a monopoly 
of the territory; it makes possible the closed door, 
by which the investing country excludes other coun- 
tries and financial groups from trading in the ter- 
ritory. It also forms the basis for political dominion 
or colonial expansion in case of disintegration or 
revolution. The Monroe Doctrine has prevented 
Mexico and South America from falling under the 
control of foreign countries, but in the case of Egypt, 
Morocco, Tunis, Persia, South Africa, and to some 
extent China, these countries have either lost their 
sovereignty, or have been parcelled out among fin- 
ancial groups or foregin powers. The process of 
exploitation of these individual countries will be 
described in later chapters. 



100 CONCESSIONS AND MONOPOLIES 

Political Intervention. 

The financiers expect their governments to see that 
the weaker countries pay their interest punctually, 
and to intervene for them with arms if necessary. 
If the exploited nation cannot or will not meet its 
obligations and threatens bankruptcy, the investors 
raise complaints about the "swindling barbarians," 
who must be subdued. 

Sometimes the coveted spot of earth is so wild and 
uncivilized that the investing classes find it neces- 
sary to induce their government to conquer it be- 
fore they can safely allow their money to go there. 
They invest money in harbor and railroad building, 
etc., and it is dangerous to do this unless there is 
some security in the territory. In this way German 
colonies were established. This is the process, with 
variations, that is going on all over the world. 

In many instances the first loans to weak coun- 
tries are used by them for guns, cannon, fortresses, 
and railroads all of which mean profits for the 
mining and manufacturing, and particularly the 
munition interests at home. The fleet must be 
kept in readiness to safeguard the foreign invest- 
ments, and this means profits for the war traders. 
Both the home government and the weak foreign 
government pay monopoly prices for guns and armor- 
plate. The arms and the iron industry, which are 
closely related to the financial interests, are there- 
fore often the first and the chief beneficiaries of the 



CONCESSIONS AND MONOPOLIES 101 

government's alliance with the investor. The mil- 
lions invested in the arms industry, and the fact 
that it is a close monopoly, make it the great power 
that it is in England and Germany. Capitalists 
readily lend the sums needed in this industry; 
while the big banks are interested in seeing that it is 
well supplied with capital. The financiers are inter- 
ested in imperialism because it means a still greater 
borrowing on the part of the home government. 
They are also brokers for the export of capital into 
foreign lands. Thus financial imperialism feeds on 
swollen profits from abroad and burdensome taxes 
at home. 

The Struggle for Spheres of Influence. 

AH of the wealthy nations are engaged in the 
scramble for spheres of influence and concessions. 
This no longer means the conquest of new peoples 
and the taking of their lands, as was the practice 
in earlier days. Russia is the only nation whose 
expansion still resembles that of previous centuries. 
Russia actually colonizes new territory, as in north- 
ern Persia, inasmuch as her primitive methods of 
agriculture necessitate the cultivating of new land. 
In general, however, the new imperialism seeks 
"spheres of influence" in semi-civilized countries, 
or countries with an old civilization but lacking in 
modern industrial development. And the wealth 
sought is not conquered land, but opportunity to 
work mines, build railroads, and get commissions 



102 CONCESSIONS AND MONOPOLIES 

for the placing of large sums of money. For this 
purpose conquest is sometimes necessary, but usu- 
ally diplomacy — with as strong an army and navy 
as possible behind it — is sufficiently powerful. 

Force is used or intrigue and bribery are resorted 
to when the concession seekers do not fear exposure. 
Border fights among less civilized natives serve as 
a means of depriving them of their lands. A riot 
in Bechuanaland in Africa, in 1897, was called a 
rebellion and used as a pretext for driving 8,000 
natives from their lands. Native labor is pressed 
into service on the land and in mines by more or less 
dubious means. Perhaps the most philanthropic 
method was that employed by the British in Rho- 
desia, where in order to secure cheap native labor 
the chieftains were bribed to use their influence 
with the members of the tribes. 1 The Belgian rub- 
ber industry on the Congo, in which King Leopold 
and a group of financiers were interested, was an 
extreme example of the abuse of the natives. Eng- 
land did not hesitate to hand over a great part of 
Persia to Russian control when that nation was 
struggling to maintain its integrity and indepen- 
dence. 

Minor Profits from Imperialism. 

The military classes look with favor upon imperi- 
alism. It offers a wider field and greater chances 
of advancement for them. The nobility see in 

1 Hobson, J., Imperialism, p. 275. 



CONCESSIONS AND MONOPOLIES 103 

imperialism opportunity for their sons. The posts 
in the civil and military service in India are so 
numerous that they not only supply the upper class 
with careers for younger sons, but many are left 
for the sons of the upper middle class also. James 
Mill called this "a system of outdoor relief for the 
upper classes." All the responsible posts in the 
service go to Englishmen, and in the Indian army the 
natives cannot reach a rank higher than that of 
subaltern. The same is true in Egypt. Young 
Egyptians are trained in the few higher schools in 
Egypt for the civil service, but the positions ulti- 
mately secured are mere clerkships; and, indeed, 
the training fits them for nothing more. Mean- 
while young men in England are being trained at 
the universities for the higher posts in that country. 

Grave International Questions. 

Grave international questions are constantly aris- 
ing from the conflicts of investors, while the sover- 
eignty of weaker states is in constant peril. Egypt, 
Persia, Morocco, and Tunis are cases in point. 

English diplomats in China, for instance, not only 
aid their countrymen in dealing with the Chinese 
Government, they support their claims against in- 
truders from other European countries. Thus the 
home government becomes interested in the domes- 
tic affairs of the exploited country. It favors those 
officials who are complacent, who readily grant con- 
cessions to its investors, and seeks to discredit those 



104 CONCESSIONS AND MONOPOLIES 

who do not. Thus the British press, inspired by the 
financial interests of the city, became the partisans 
of Yuan Shih-kai, who became an adviser of the 
Emperor of China in 1907, and who was notoriously 
pro-British in the concessions favored. When Yuan 
Shih-kai fell from power, and a certain railway con- 
cession worth 3,000,000 pounds went to a German 
instead of to an Anglo-French syndicate, China's 
future was despaired of. After 1909 British diplo- 
macy worked in concert with other European powers 
through a close monopoly in China, and forbade the 
country to borrow anywhere except from what was 
known as the five-power group of banks. This 
became the official channel of financial supply for 
China. No British capital could be invested in 
China save through this source. The system finally 
broke down because of Chinese opposition, and other 
banks outside of the favored group were permitted 
to seek concessions. 

Rival embassies in Turkey were continually bar- 
gaining for concessions for their respective banking 
syndicates. The French embassy tried to persuade 
Turkey to buy her arms from Creusot. The German 
embassy pointed out the ease with which she could 
secure a loan from Germany if she would spend some 
of it on cannon from Krupps\ 

The Closed Door and Financiers' Wars. 

What is most desired is recognized "spheres of 
influence," from which other countries can be ex- 



CONCESSIONS AND MONOPOLIES 105 

eluded and in which the trade can be controlled by 
the home government through protective tariffs. At 
the time of the Morocco dispute with Germany, 
France and England claimed the right to decide that 
country's destinies, because they chiefly were inter- 
ested in the trade of the country. But the trade of 
Morocco is insignificant. So is that of Tunis, whose 
natives care very little for the ingenious articles 
manufactured in France. But once a nation has 
established a "sphere of influence," she can exclude 
the subjects of other nations from the mines and oil- 
wells in her territory. Asiatic Turkey was marked 
out fairly definitely into such spheres. Syria was 
French, Anatolia German, and Armenia Russian. 
But the boundaries overlapped, and formed a fertile 
cause of trouble. 

In Persia, as a result of the Convention of 1907, 
the spheres of Russian and English influence were 
more clearly mapped out. England's sphere is all 
the territory to the south of a certain line, Russia's 
all that to the north of a certain line. Between the 
two lines is a neutral zone, which is open to the ex- 
ploitation of either country. These "spheres" are 
humiliating to the exploited government, whose 
policies and politics are also "controlled." The ex- 
ploitation of Persia is described in another chapter. 

Many times within the past generation the greater 
nations have been near war or have actually re- 
sorted to arms in their efforts to secure foreign in- 



106 CONCESSIONS AND MONOPOLIES 

vestments or obtain new fields of exploitation. 
England and Germany sent a naval expedition to 
Venezuela because certain of their favored financiers 
had grievances against Castro's government, even 
though the step caused friction with the United 
States. 

France's intervention in Mexico during the reign 
of Napoleon III was to make secure the money in- 
vested by French citizens in that country. 

The Boer War was caused by the fact that English 
capitalists found it impossible to secure without con- 
quest the control so necessary to exploiters. The 
quarrel with the Boer Republic was based on two 
points: (1) English interests objected to the dyna- 
mite monopoly; and (2) the Uitlander (i. e., foreign) 
community of mine-owners and their employees 
were not allowed the rights of citizenship and rep- 
resentation in the republic on as easy terms as 
they wished. What the mine-owners really desired 
was political power, that they might control the 
wages, conditions of labor, etc. 

One of the main causes of the Russo-Japanese 
War was Russia's refusal to keep her pledge to 
evacuate southern Manchuria. Instead she con- 
tinually advanced her interests in northern Korea, 
which the Japanese claimed as their own sphere 
of influence. All the Czar's ministers, including 
Count Witte and General Kuropatkin, minister of 
war, advised that the pledge be kept. But a small 



CONCESSIONS AND MONOPOLIES 107 

group of the court party were interested in the 
great timber-lands on the Yalu River. The Czar, 
it has been asserted, was interested to the extent of 
$1,000,000 in the enterprise, which his viceroy in- 
deed conducted as an imperial undertaking, in spite 
of the better judgment of the ministers. 1 

The occupation of Morocco by France was at the 
instance of the French bankers who had loaned 
money to the Sultan; the Italian War with Tripoli 
was inspired by similar forces, as were the aggres- 
sions of all the powers against China. 

"The old imperialism," says Brailsford, "levied 
tribute; the new imperialism lends money at 
interest." 

Here are the elements of the new imperialism; a 
ruling class at home which is also the owning and 
investing class; great financial houses closely re- 
lated to the government, and owned and controlled 
by the class which rules; surplus capital and a fall- 
ing domestic interest rate, facing backward civiliza- 
tions ready to be exploited by the more highly or- 
ganized nations. Added to these is the diplomatic 
policy of protection to foreign investments, the doc- 
trine that the flag follows the investor and backs up 
his private contracts. The land, mining, railroad, 
and oil grants secured by German, English, and 
American investors in Mexico; the mine conces- 

1 Brailsford, The War of Steel and Gold, p. 53. 



108 CONCESSIONS AND MONOPOLIES 

sions in South Africa; the loans made to the Khedive 
of Egypt and the Sultan of Morocco; the Chinese 
five-power loan are all indicative of the methods 
employed to secure concessions and make invest- 
ments which the governments of the investing coun- 
tries have not hesitated to enforce by a show of 
strength. The rule of "caveat emptor" does not 
apply in international dealings when the " developed " 
nation is too weak to resist. 

One of the results of imperialism is the loss of 
liberty by almost all of the non-European peoples, 
with the exception of those of South America, Cen- 
tral America, and Asia. They have become mere 
hunting-grounds for European capitalists. 



CHAPTER X 
THE "WAR TRADERS" AND MUNITION MAKERS 

If we give any thought to the subject we prob- 
ably think of the makers of war munitions as rather 
unimportant concerns that sell to their respective 
governments along with other private customers. 
As a matter of fact, the munition makers form one 
of the most powerful industrial combinations in the 
civilized world. The capitalization runs into the 
thousands of millions. The companies include 
among their stockholders and directors the most 
powerful individuals in their respective countries. 
They are related to the great banking houses and 
have a close and intimate connection with the rul- 
ing classes of every country in Europe. Their an- 
nual contracts, even in peace times, approximate a 
thousand million dollars. The profits are colossal, 
and the munition makers, with their international 
understandings (in peace times), approach very 
closely to a world monopoly. 

Prior to the war the munition interests in the 
United States included the Carnegie Steel Company 
(a part of the United States Steel Corporation), the 
Bethlehem Steel Company, the Midvale Steel Com- 

109 



110 THE "WAR TRADERS" 

pany, and the du Pont Powder Trust, with a com- 
bined capitalization, including the Steel Trust, of 
nearly $2,000,000,000. And this does not include the 
ship-building plants, the minor munition and small- 
arms factories, and the multitude of plants that have 
been converted into munition works during the pres- 
ent war. In Germany the combination includes the 
Krupp Works and the German Arms and Munitions 
Factories, with a capitalization of over a hundred 
millions more. There are four leading firms in Great 
Britain with a capitalization of $250,000,000, and 
with branches (note the internationalization of the 
munition makers) in five or six other countries. 
There are great munition plants in France — the 
Schneiders at Creusot — in Austria-Hungary, in 
Russia, in Italy, and Japan, not to speak of half a 
dozen other smaller states. 

These great firms (in peace times) work in har- 
mony through trade agreements, by a division of 
selling territory, by price agreements, by the owner- 
ship of patented processes, and a unity of interests 
in the promotion of armaments and the creation of 
unpreparedness scares to induce countries to in- 
crease their armament. No other influence, with 
the exception of the great financiers, is so largely 
responsible for the agitation for armament and 
"preparedness" and for the increase in war expendi- 
tures which has taken place during the past twenty 
years as the makers of war munitions. 



AND MUNITION MAKERS 111 

Our Ignorance of Armament Makers. 

That we know so little about the munition mak- 
ers is due to the fact that they trade in the dark. 
Their dealings are, for the most part, secret. The 
war office is privileged. In most European coun- 
tries a strict censorship is enforced over all matters 
relating to war contracts and material. Only on 
rare occasions is the veil of secrecy lifted. The in- 
vestigations of the armament interests at Washing- 
ton are almost the only instances of anything ap- 
proaching a real public inquiry. 

During the years immediately preceding the pres- 
ent European war, much information came to light 
in Germany, England, and the United States. There 
were disclosures by the press and radical members 
of the government, and from these and other sources 
certain facts have been established, among which 
are the following: 

First. The firms making munitions of war are 
colossal corporations earning tremendous dividends 
for their stockholders. They are intimately re- 
lated to the great financial institutions which are 
close to the government. In actual practice there 
is a substantial merger of the munition makers, the 
financiers, and the government. 

Second. The "war traders" are woven into the 
governments of almost all the European countries 
through the ownership of stock by reigning houses, 
members of parliament, public officials, journalists, 



112 THE "WAR TRADERS" 

members of the diplomatic corps, and the ruling 
classes. 

Third. The munition makers promote foreign con- 
nections and loans as an aid to sales, and are a con- 
stant menace to official integrity, not only at home 
but among the nations with which they deal. 

Fourth. The war traders are largely responsible 
for the increase of armaments, for the colossal 
growth in expenditure for war. They are influential 
with the press. They promote war scares. In ad- 
dition, they are directly responsible for imbroglios 
with weaker states, and are a constant menace to 
the peace of their own country. 

Fifth. The war traders create public opinion to 
induce governments to scrap existing equipment and 
provide new guns, munitions, and supplies which, 
when secured by one country, are made a reason for 
a similar scrapping process in a neighboring nation. 

Sixth. There is no patriotism among the war 
traders. They sell to any nation, even those hos- 
tile to their own. That they maintain active and 
powerful lobbies at home and abroad; that they 
subsidize and even own newspapers; that they are 
so closely related to the ruling and financial classes 
as to be almost indistinguishable from them, are all 
well-established facts. 

The activities of the munition makers, like the 
activities of the financial interests, are impersonal. 
They cannot be laid at the door of any individual. 



AND MUNITION MAKERS 113 

The responsibility is lost. They became part of a 
struggle of capitalistic groups for business, for prof- 
its, for a share of the war budgets of the world. It 
is because of its impersonality and the impossibility 
of holding any one responsible that the arms in- 
dustry is unsafe in private hands. It, like any other 
menace to the very life of society, should be under 
public control; and this is only possible through 
public ownership. 

The Capitalization and Profits in Munitions. 

The munition companies with the shipyards and 
their allied interests comprise what is probably the 
most powerful industrial combination in Great 
Britain. The same is true in other countries. In 
America the combination includes the Steel Cor- 
poration (which owns the Carnegie Steel Company) 
and is identified with the most powerful financial 
group in Wall Street. In Great Britain Vickers 
Sons & Maxim is the largest single firm, with a 
total capital of $40,000,000; while Armstrong, 
Whitworth & Company has a capitalization of $33,- 
500,000. If we add to these the other munition 
plants and those for the building of battleships, 
arms of all kinds, etc., we have a total capital which 
is estimated at $750,000,000. And, as we shall later 
see, these companies have domestic and interna- 
tional agreements which make them in substance a 
monopoly. 

The making of munitions even in peace times is 



114 THE "WAR TRADERS" 

a most profitable business. The firm of Krupp in 
Germany has grown, in a little over a generation, 
from a small forge to the world-enveloping consoli- 
dation that it is. Its capitalization is 250,000,000 
marks. The operating profits of the company during 
the first year of the war were $28,300,000. In nor- 
mal times the dividend rate is 12 per cent, on the 
capital. The German Arms and Munitions Facto- 
ries, second only to the Krupps, has grown with only 
less rapidity. The French firm of Schneider Brothers 
(Creusot) pays a dividend of 20 per cent., and 
the average for the four leading firms in England, 
with a capital investment of $250,000,000, runs 
from 1)4, to 15 per cent. According to the Lon- 
don Times, "for the years of the present century 
the dividend (of Armstrong, Whitworth & Com- 
pany) has never fallen below 10 per cent., and on 
five or six occasions it has been as high as 15 per 
cent." In 1913 the shareholders had an "agree- 
able surprise," says the Times, in the shape of a 
123^-per-cent. dividend on the ordinary, with a 
bonus of one share on every four shares previously 
held, or 25 per cent, additional. In the same year 
Vickers Limited paid 10-per-cent. dividend and in- 
creased its assets by $5,840,000. The profits of 
these two concerns alone for the six years, 1908 to 
1913, peace years just preceding the present war, 
aggregated $39,043,000. Cammell-Laird distrib- 
uted an average of 12 per cent, a year for nine years, 



AND MUNITION MAKERS 115 

while the average dividend of the Harvey United 
Steel Company was 15 per cent. The pyrotechnic 
advance in the value of the shares of the Bethlehem 
Steel Company in the early months of 1915 as a 
result of its European war orders, as well as the 
colossal stock dividend of the du Pont Powder 
Company are among the spectacular episodes of the 
New York Stock Exchange. 

Speaking in general of the munition makers 
and their relations to the British Government, 
Mr. George Herbert Perris, an English writer, 
says: 1 

"The great bulk of the so-called defense expendi- 
ture of the British Empire goes into the hands of 
private profit makers. It is an immensely large and 
lucrative trade. It consists of companies and com- 
bines, the strongest of which are closely allied, and 
compete less and less. It is essentially, and is be- 
coming more and more, a cosmopolitan trade; its 
owners' nationalist pretensions are, therefore, rank 
humbug. It employs the usual touting arts of com- 
merce; but it also manufactures two special kinds 
of opportunity: (1) The flotation of new types of 
arms, which result in enormous ' scrapping' of exist- 
ing material; and (2) the international scare, of 
which the Mulliner 'crisis' of 1909 is a type. 

"Such is the modern trade in arms; and I will 
only add one word about it: If British democracy 
does not soon find a way of destroying this hydra, 
it will destroy British democracy." 

1 The War Traders, p. 32. 



116 THE "WAR TRADERS" 

European War Orders. 

Enormous fortunes have been made from war 
orders placed by the European governments in the 
United States. Before the war shares of the Beth- 
lehem Steel Company fluctuated around $40. July 
25, 1914, the stock sold for $39, and three days later 
for $36 a share. Even after war was declared the 
stock did not rise rapidly for several months. On 
December 29, 1914, it was still quoted at $45, and 
in February, 1915, at $54. From this time on its 
rise was rapid, until at the end of October, 1915, 
shares in the company sold as high as $500. Dur- 
ing the same month Colts Arms sold for $840 a 
share, du Pont Powder at $390, and Midvale Steel 
at $500 a share. Winchester Repeating Arms, 
under the stimulus of war orders, rose to $2,400 
a share. In July, 1915, it had fluctuated around 
$1,700 a share. 

The increase in the value of the securities, during 
the past year, of corporations filling war orders from 
the United States is over $850,000,000. 

A Dangerous Merger of Profit and Patriotism. 

It is a dangerous thing for personal interests to 
be confused with public trust, as we have learned in 
recent years from the disclosures of the close con- 
nections of the railroads, tariff interests, banking 
and land-grabbing corporations with Congress, as 
well as the similar connections of the public-service 
corporations in our cities. Similar questionable 



AND MUNITION MAKERS 117 

connections are not uncommon in Great Britain and 
Germany, and it seems safe to assume that the same 
is true of other countries. The impersonality of the 
corporation protects the stockholder, as does the 
distinguished class to which he belongs and the ap- 
parently patriotic trade in which he is interested. 

Many of the large stockholders of the munition 
companies in England are members of Parliament, 
while substantially all of the stock is owned by the 
most influential classes in the kingdom. Other 
stockholders are close to the ministry, they are in 
intimate contact with the foreign office and the 
diplomatic service. Whichever party is in power, 
the munition makers and their affiliated interests 
are in intimate touch with foreign affairs. An ex- 
amination of the list of stockholders of the Vickers 
Company alone, made by the Investors' Review in 
1909, showed that 123 of the most important stock- 
holders were members of Parliament, or were closely 
related to the government. Of these, 2 were dukes, 
2 were marquises, 50 were earls, barons and their 
wives, sons, and daughters, 15 were baronets, 20 
were knights, and 8 were members of Parliament. 
Twenty were military and naval officers. In addi- 
tion there were 3 great financiers and 8 newspaper 
owners and journalists. 

And this is but one of the six larger companies, 
not to speak of a score of ship-building plants in 
which the list of stockholders is probably equally 



118 THE "WAR TRADERS" 

distinguished. Many members of the boards of 
directors are in Parliament, while officials of the 
army and navy pass back and forth without protest 
from official places to employment with these pri- 
vate companies at high salaries. 

Speaking of the alliance between public office and 
private profit, as well as the passage of prominent 
officials from the government service to the employ- 
ment of the armament companies, Mr. Perris says: 1 

"What do these facts imply? Firstly, that these 
immensely wealthy and powerful companies and com- 
bines are intrenched firmly, perhaps irremovably, 
in the governing class of Great Britain and its de- 
pendencies. Their forty or fifty or sixty millions of 
capital largely belong to this class, many members 
of which would be gravely injured by any arrest of 
the competition in armaments; and millions of 
yearly dividends, besides salaries, directors' fees, 
and trustees 7 honoraria are distributed largely within 
this class, creating, consciously or unconsciously, in 
it the permanent temper of militarism in which our 
' service' estimates are conceived and carried. 

"Secondly, that they command the kind of skill 
and special knowledge which is popularly supposed, 
and surely ought, to be the exclusive property of the 
government. Upon that kind of skill and special 
knowledge the safety of the kingdom and the empire 
is supposed to depend; yet we see it being offered 
like any common commodity to, and bought by, 
companies increasingly cosmopolitan in character, 
companies constantly building for foreign pur- 
chasers, building in foreign yards, partners with 

1 The War Traders, p. 24. 



AND MUNITION MAKERS 119 

German, French, Italian, and other manufacturers. 
Much of this special knowledge was once secret in- 
formation, obtained in the very highest and most 
strictly guarded recesses of the government service. 
All the members of Parliament at Westminster 
cannot persuade Sir Edward Grey to subject his de- 
partment to the gaze of a responsible foreign affairs 
committee; but secretaries of the treasury, colonial 
governors, dockyard superintendents, directors of 
naval and military intelligence, high army and navy 
officers, and even secretaries of that sanctum sanc- 
torum, the imperial defense committee, are per- 
fectly free to carry the experience they have thus 
confidentially gained at the cost of the state into the 
service of an abominable private trade." 

Patriotism, the fear of political scandals, the fact 
that the arms traders are impartial in their party 
affiliations shield their officers and stockholders 
from the imputation that immediately attaches to 
any other public official who is personally interested 
in any contract with the government of which he 
is a part. 

The same close alliance between the armament 
makers and the ruling class is to be found in other 
countries. The house of Krupp is identified with the 
empire by personal relations with the Kaiser and 
by the closest kind of connection with the centres 
of finance. 

The close interlocking of company stockholders 
and directors with the governing classes in matters 
affecting peace and war is dangerous to disinter- 



120 THE "WAR TRADERS" 

ested judgment; but, by reason of the high position 
of those involved and the impossibility of tracing 
any real or casual relation between public acts and 
private interest, direct charges of improper activity 
cannot be made. The least that can be said is that 
such a relationship is so inconsistent with standards 
of private trust that no honorable man would per- 
mit himself to profit by his public acts. 

War Traders as War Scare Makers. 

The immense wealth, the powerful political con- 
nections, the close relations with the great financial 
houses, as well as their immunity from attack, make 
the war traders dangerous to the peace of any coun- 
try. The vast sums of money lent to weak govern- 
ments, says Karl Radek, are used by them mainly 
for guns, cannon, fortresses, munitions, and rail- 
roads; all of which means profits to the manufac- 
turing and mining interests at home. Otherwise the 
loans would not be made. 1 

The firm of Krupp has representatives in every 
capital of the world, from Tokio to Constantinople, 
and from Petrograd to Buenos Aires. The same is 
true of the great munition firms of England and 
France. M. Clemenceau, in a series of articles on 
the South American republics written some years 
ago, said that German guns had beaten French 
guns in that quarter of the globe by virtue of the 
more liberal use of money by the Germans in their 

1 Der deutsche Imperialismus und die Arbeiterklasse, 1912. 



AND MUNITION MAKERS 121 

negotiations with the officials of Latin American 
countries. 

Directors and stockholders of the munition com- 
panies are closely related to the owners of the press 
in their respective countries, which are active in the 
promotion of preparedness and the stirring up of 
war scares. The Berlin Post, of strong jingo ten- 
dencies, is either owned or largely controlled by 
stockholders in the German munition firms. The 
list of stockholders in the munition plants of Great 
Britain includes journalists and owners of influential 
English papers. The munition makers, like the in- 
vestors, are closely interwoven with all of the 
agencies of public opinion in the country. 

Firms of different nationalities co-operate in rais- 
ing war scares across each other's frontiers, and 
transmute national jealousies into gold for them- 
selves. The German Arms and Munitions Factories, 
which is not a single firm, but a group of firms form- 
ing an organization second only to Krupp, and having 
the Mauser and Dollingen Works among its members, 
wrote to its agent in Paris a year or two ago : " Get 
an article into one of the most widely read French 
newspapers — the Figaro if possible — to the follow- 
ing effect: 'The French Ministry of War, has de- 
cided to accelerate considerably the provision of 
new pattern machine guns, and to order double the 
quantity at first intended.' " The news was intended 
for German consumption. Confronted with such 



122 THE "WAR TRADERS" 

a news item, the combine reasoned, the Reichstag 
would readily agree to the purchase of new machine 
guns for Germany. 

The great German arms industry also employed 
special agents to corrupt military and naval officers, 
and government documents of the most confidential 
nature came into the hands of Van Dewitz, one of 
the managers of the Krupp Works. This and similar 
scandals were exposed by Doctor Liebknecht in the 
Reichstag, and published in the Socialist Vorwaerts. 

The Mulliner Scare in England. 

It is to the interest of these war firms to create 
war scares. The naval scare of 1909, when England 
was led to believe that Germany was secretly build- 
ing a great number of battleships, was traced to 
the influence of the managing director of the Coven- 
try Ordnance Company (owned by Cammell-Laird 
and John Brown), a Mr. Mulliner, who had the 
confidence of the cabinet. His underground cam- 
paign for a war scare began in May, 1906, when the 
British admiralty received its first "information" 
about a great new navy being built by Germany. 

By 1909 Mr. Mulliner had so impressed the 
government that he was called to give evidence 
before the cabinet. The "evidence" spread quickly 
through the land and resulted in a great naval 
scare. "We want eight, we won't wait," was the 
slogan — "eight" meaning battleships. As a re- 
sult of Mulliner's "tip" the British Government 



AND MUNITION MAKERS 123 

announced that Germany would have 17 new battle- 
ships by March, 1912. Mr. Balfour, even more 
gullible than the rest, counted upon 25, or at least 
21. Germany had, in fact, according to the British 
Naval Annual, only 9 dreadnaught battleships and 
cruisers by March, 1912, and only 14 in March, 
1913. Von Tirpitz had even made an announce- 
ment to this effect several years before. But the 
"scare" had the desired effect in England. It re- 
sulted in a big increase in the navy estimate of $6,- 
500,000. 

A number of English writers have recognized the 
menace from private profit in war. Says Mr. H. N. 
Brailsford: * 

"It is enough to realize that in every country 
and across every border there is a powerful group 
of capitalists closely allied to the fighting services, 
firmly intrenched in society and well served by 
politicians and journalists, whose business it is to 
exploit the rivalries and jealousies of nations and 
to practise the alchemy that transmutes hatred into 
gold. Against them are ranged the masses with 
their more numerous but ill-organized votes." 

Promoting Militarism Among Defenseless Peoples. 

The war traders are not content with the ex- 
ploitation of their own country. They are active 
among revolutionary groups in distant parts of the 
world. They induce weak and helpless peoples to 
enter the race for armaments, for militarism, which 

1 The War of Steel and Gold, p. 93. 



124 THE "WAR TRADERS" 

leads toward bankruptcy or intervention. Speak- 
ing of the activities of arms traders in this field, Mr. 
Perris says: 1 

"Evidently businesses of the magnitude of those 
with which we are dealing must have their agents 
and travellers, open and secret. What vaguely 
moves our disgust is, perhaps, just this, that it 
should be necessary for a certain class of British 
manufacturers, for whom a peculiar degree of 
patriotism has been claimed, to maintain abroad a 
service of scouts whose profit depends on their 
power of inveigling smaller foreign nations ('half- 
devil and half-child/ as the bard of empire called 
them) into the deadly feuds and the abominable 
waste of the 'great powers.' We know in our 
hearts that, in the case of these small states, the 
conventional arguments have none of the plausibil- 
ity they have in England, France, or Germany. If 
Portugal is in danger, two or three battleships can- 
not save her. China no more needs torpedo craft 
than Canada needs dreadnaughts. The only reality 
on which such a trade can be based is the readiness 
for violence which seems to exist in and between 
certain South American states. Civil war or inter- 
national war, no matter — the agent of some British 
trust stands at the elbow of the rival freebooters, 
and his trade depends upon their savagery. We 
are parties to solemn treaties closing large parts of 
the earth to the traffic in arms. We keep gunboats 
here and there to repress this illegal traffic. At the 
same time, arsenals and dockyards inseparably 
bound up with the British state are carrying on a 
larger traffic essentially of the same character. All 

1 The War Traders, p. 19. 



AND MUNITION MAKERS 125 

over the world the name of England is being thus 
damned, in the eyes of the peoples and posterity, 
as the supreme exemplar in the arts of homicide. 
The iniquity of dumping opium upon a reluctant 
China has at last been most practically recognized. 
When shall we see that the trade in big guns and 
high explosives is equally a trade in poison?" 



Under the influence of the British armament inter- 
ests little Portugal was persuaded that she needed 
a new navy and that only British ship -builders 
could build it. Accordingly, a British syndicate 
was formed and a beginning made in a naval pro- 
gramme for a country with a revenue of only $80,- 
000,000 a year, and a present debt of $900,000,000, 
by the appropriation of $7,500,000 for that purpose. 

As one of the side products of the Chinese "five- 
power loan," referred to elsewhere, agreements were 
signed in 1913 for two 6-per-cent. loans, one for 
$10,000,000 in the name of the Austrian armament 
firms, and one for $6,000,000 in the name of the 
German firm, The Vulcan. The two loans were 
negotiated by the Austrian legation, and of this sum 
$7,500,000 was to be paid in cash, and the balance 
of $8,500,000 was to be held by the houses which 
negotiated the loan pending the purchase of tor- 
pedo-boats. Thus the financiers and war traders 
play into one another's hands. 

Agents of the munitions factories cause trouble 
with barbarous and semi-civilized tribes in remote 



126 THE "WAR TRADERS" 

corners of the earth. They sell obsolete and worth- 
less arms. They promote sales, and by so doing 
foment revolutions in the Central American and 
South American countries. Raiding Afghans and 
revolutionists are among the best customers for 
obsolete equipment. 

Speaking of the activities of the war traders in 
fomenting trouble in remote corners of the earth, 
Mr. Perris says: 1 

"For the best part of a century, England has 
freely spent money and life — we still spend many 
thousands of pounds yearly — in the effort to sup- 
press slave-raiders and slave-traders in Africa and 
Asia, and to repel the attacks of tribesmen armed 
no longer with bows and arrows, but with modern 
rifles and cartridges. Where do these weapons come 
from? Who arms the hillmen of the Indian fron- 
tier, the road bandits of Persia who recently killed 
certain British officers; who arms the slavers of the 
Gulf, and the Arabs of the Tripolitaine, the Somalis 
and Abyssinians, the Albanians and Cretans, the 
Revolutionaries of South America, and the innum- 
erable natives of inner Africa? Birmingham is not 
going to tell us the secrets of gun-running on the 
coast of Morocco. But this we know — that the 
British exports of firearms and ammunition (not 
including armor-plates and other large material) 
amounted in 1911 to 3,845,000 pounds, and that 
this 'patriotic' trade is rapidly growing. We may 
be sure that, in this instance also, the curse of mili- 
tarism comes home to roost." 

1 Perris, The War Traders, p. 13. 



AND MUNITION MAKERS 127 

Promoting Militarism at Home. 

The munition makers keep up a constant propa- 
ganda for increased appropriations at home. "The 
munitions plants must be kept busy/' they say, 
"otherwise capital will not invest in the industry, 
and the country will find itself unprepared in case 
of emergency." A great army of workmen must be 
kept employed. Behind this army are other work- 
men who fear for their jobs if men are thrown out 
of employment. The Armstrong, Whitworth Com- 
pany supports 120,000 men, women, and children 
in the New-Castle-on-Tyne works alone, or about 
one-third of the whole population. Added to the 
actual workers in the mills and plants is the whole 
army of soldiers and pensioners, of contractors and 
business men who are directly or indirectly inter- 
ested in seeing the munitions works kept going; 
and these classes, according to Mr. Perris, all told, 
amount to one-sixth of the occupied adult males of 
the United Kingdom. 

Foreign war scares aid the propaganda, as does 
the adoption of some new gun, or the building of a 
new type of battleship. Fear is wrought upon. Ig- 
norance contributes to the hysteria, as does any man- 
ifestation of activity by a supposed hostile power. 

Here is a great organized syndicate, in its rami- 
fications the most powerful in the kingdom, of capi- 
talists and statesmen, financiers and workmen, offi- 
cers and soldiers clamorous for war expenditure, 



128 THE "WAR TRADERS" 

for the building of warships, the scrapping of old 
and the purchase of new armaments, and all so 
sympathetically represented by the owners and 
stockholders of newspapers and by public opinion 
that their voice is always heard. 

The Appeal for Contracts. 

The munition factories act as though the govern- 
ment owed them contracts. When there is a cessa- 
tion of orders they do not hesitate to complain. The 
firm of Cammell-Laird was struck off the admiralty 
lists of contractors of Great Britain a few years ago. 
Thereupon the firm sent a letter to the late Lord 
Tweedmouth, stating that it had 4,000,000 pounds 
in issued shares and debenture capital, and urged in 
effect that the government, having acquiesced in 
the laying down of the plant and machinery, should 
feed it with orders. The large forces of workers in 
these plants also raise their voice for more arma- 
ments. In this they are backed by the imperial- 
istic press. After the South African War, when a 
large part of the workmen at the Woolwich Arsenal 
were no longer needed, these newspapers, most of 
which had never shown any sympathy for labor, 
were loud in their demands that the government 
keep these men at work. 

Commenting on the power and influence of these 
interests in Great Britain, a pamphlet of the World 
Peace Foundation says : * 

1 Syndicates for War. Reprint of London correspondent New 
York Evening Post. World Peace Foundation, vol. 1, July, 1911. 



AND MUNITION MAKERS 129 

"We have to face the uncomfortable fact that 
year after year an increasing number of English 
workmen as well as of English capitalists and share- 
holders in every walk of life are placed in a position 
in which peace means for them financial loss, while 
war means prosperity. . . . 

"Of the three classes I have mentioned, the capi- 
talists are the most dangerous, for their power is 
tremendous, their wealth almost unlimited, and their 
patriotism nil. Even when they have not, like 
Krupp, their own organ in the press, they are hand 
in glove with all the great proprietors and editors; 
they belong to the same clubs as legislators and 
lawyers and authors; they are in close touch with 
all influences which mould public opinion; they 
have even about them a romantic glamour, such as 
never by any chance attaches to the men who make 
far more useful masterpieces, like boots or breeches. 
... It would be too much to ask of human nature to 
expect these men to refrain from raising war scares." 

No other business has such an easy entry into the 
public prints; no other group is so immune from 
criticism or investigation; no other class is so emi- 
nently respectable or powerful. It is possessed of 
unlimited resources. It can maintain publicity 
agencies and propaganda organizations for national 
defense, for peace through preparedness, for the 
maintenance of the dignity and honor of the nation. 
Its ramifications are endless, and its methods so sub- 
terranean that they cannot be combated, even were 
any organization powerful enough to do so. Like 
the privileged interests of our cities, the munition 



130 THE "WAR TRADERS" 

makers have every advantage and every weapon in 
their hands. Even democracy is undermined by the 
identification of the worker, and the traditional 
claims of patriotism with the cause for which muni- 
tion makers claim to be working. 

A New Menace to American Peace. 

Here is a menace which America must face when 
the European war is over. Over one thousand 
million of war orders have been placed in this 
country. The profits have been enormous, running 
as high as 20, 30, and even 40 per cent. Scores of 
plants have been converted into munition factories. 
Immense sums have been invested in new machines. 
High wages have been paid, and immense fortunes 
realized from the traffic. 

We have created such privileged groups before. 
We created them by the protective tariffs of the 
Civil War, by the land grants to the Pacific railroads, 
by the privileges of the national banks, by the 
princely grants of our cities to the franchise cor- 
porations. And for fifty years we have been reap- 
ing the consequences of our generosity. The taste 
for easy money once gratified does not willingly re- 
linquish its privileges. And when the European 
war contracts have been filled there will be a power- 
ful group of business interests, ramifying into banks 
and financial institutions, to which it will be im- 
mensely profitable to promote greater and greater 
expenditures for war. They are influential with the 



AND MUNITION MAKERS 131 

press. They have a ready hearing by the public. 
And they may organize — if they have not already 
done so — to carry on an irresistible propaganda to 
stimulate war preparations and increased expendi- 
tures, as have the munition makers in the countries 
of Europe. This may be a costly price to pay for 
our present profits from the European war. 

" Scrapping." 

"Scrapping" existing munitions to create a mar- 
ket for new engines of destruction is a favorite oc- 
cupation of the munition makers. A new gun of 
increased calibre makes valueless the equipment of 
all other countries with which the nation possessing 
it may be at war. Increased speed in cruisers makes 
still greater speed necessary by competitors. The 
$12,000,000 super-dreadnaught scraps the $10,- 
000,000 dreadnaught, and the submarine may scrap 
them both. No sooner is a navy built or an army 
equipped than claims are made that it is out of 
date. During the past ten years we have spent 
$2,000,000,000 on our army and navy. It was aimed 
to place the United States on a par with Germany 
or France. Yet editorials and war propagandists 
insist that the navy is that of a third or fourth 
rate power; that the battleships are lacking in this 
equipment or that, that we have an inadequate com- 
plement of torpedo-boats, of destroyers, of convoys, 
of cruisers, and that in case of war, even with the 
exhausted and depleted nations of Europe, we should 



132 THE "WAR TRADERS" 

be in a defenseless and helpless position. Such 
was the Mulliner scare in England; such are the 
tactics of the munition makers and ship-builders of 
Germany, France, and Italy. And to meet this 
hue and cry there is no court to which democracy 
can appeal, no experience to which Congress and 
the civil authorities can go save to the munition 
makers and the army and navy officials, for there 
are no standards of preparedness. 

Nowhere in the civilized world is there such 
waste, and nowhere do civilians and experts proceed 
to colossal expenditures with less knowledge of the 
value of their output. In the whole realm of war 
expenditure everything is guesswork, and those 
who venture to criticise or insist upon some assur- 
ances of efficiency are immediately challenged as 
unpatriotic. 

Germany has been unwilling to permit her bil- 
lion-dollar fleet, which has commanded such un- 
bounded enthusiasm, to emerge into the open seas, 
and has contented herself with the "wearing-down" 
process of submarine sniping. The toll of battle- 
ships in the Dardanelles has been large, while the 
open-sea fighting between isolated ships of Ger- 
many and England has left the score but little to 
the advantage of either country. 

" Patriotism." 

There is no narrow-minded patriotism, no in- 
sularity among the armament makers and war 



AND MUNITION MAKERS 133 

traders. The whole world is their fatherland. The 
ensigns of every country fly from the mastheads 
of their battleships, and men of every race and 
creed man the guns made by Germans, English, 
French, and Americans. It matters not that stock- 
holders and directors are high in confidential official 
positions; it signifies nothing that they are the 
most fervid of patriots in the halls of parliament 
and on the hustings, or that the protection they 
receive and a large part of the profits they enjoy 
are paid by the sufferings and the taxes of their 
own countrymen. The war traders are international 
in their sympathies, far more international than 
those who meet at the Hague conferences, but they 
differ in this particular: the intelligence and the 
capital of the war traders are for sale to any bidder. 
The building of a Russian navy by a German 
firm, or of foreign battleships in English yards, 
scarcely excites comment. As late as 1913, when 
Turkey was the ally of Germany, the Armstrong- 
Vickers group in England entered into a contract 
to reorganize the Turkish naval dockyards. The 
English firms found the capital and technical knowl- 
edge essential to the success of the undertaking. 
At one time the German firm of Krupp and the 
French firm at Creusot (Schneider) united in a part- 
nership to develop the iron-ore fields in Algeria. The 
partnership was continued until public opinion in 
France stopped it. The British arms trust had two 



134 THE "WAR TRADERS" 

subsidiary companies in Italy, when Italy was the 
ally of Germany and Austria. Here battleships for 
Italy and Turkey have been constructed. It had 
other plants in Spain, Portugal, and Japan. After 
the Japanese war the Russian fleet was rebuilt by 
British, French, German, Belgian, and American 
firms at a cost of $250,000,000. 

Among the revelations of Doctor Liebknecht in 
the Reichstag a few years ago was the fact that 
preferred shares in the steel-plate works at Dol- 
lingen were in the hands of Frenchmen, who en- 
joyed the profits from the exorbitant prices paid by 
the German Government for armor-plates. As 
stockholders, moreover, they could easily know 
just what the German Government had ordered, 
which might explain some of the "leaks" in that 
company. When the Socialist leader made his dis- 
closures about the Krupps the government did not 
exactly defend the firm, but it took the chivalrous 
attitude governments are wont to take toward their 
munitions firms. The minister of war, Von Heerin- 
gen, claimed that only minor matters were in ques- 
tion, that too much fuss had been made over the 
scandals, etc. At any rate, as it turned out, only 
subordinates received punishment, and not very 
severe punishment at that. 

The United States. 

Patriotism should rise to exalted heights in such 
companies as the United States Steel Corporation, 



AND MUNITION MAKERS 135 

the Bethlehem Steel Company, the Midvale Steel 
Company, and the du Pont Powder Trust. They 
have received every favor that a too-generous gov- 
ernment could grant. They have been protected 
by prohibitive tariffs; they have been permitted to 
acquire vast iron ore, coal, and other deposits; they 
have been allowed to own other lines of industry 
and buy up competing plants. Up to the present 
time they have been immune from antitrust laws. 
Under the protecting arm of the government they 
have amassed property capitalized at approximately 
$2,000,000,000. For such governmental aids and 
largesses, unparalleled by the grants and subsidies 
of all other nations to their most favored industries, 
America should expect gratitude; it should expect 
treatment and prices at least as favorable as those 
given countries which are supposedly or potentially 
unfriendly to us. 

But when profits are involved patriotism be- 
comes sentimentality. It has no place in the 
counting-room. It is the most valuable ally in 
committee hearings and for navy and security 
leagues, but it halts when government contracts 
are involved. 

The United States Government spends annually 
$240,000,000 on its army and navy, a large per- 
centage of which goes to the four firms mentioned, 
which constitute the ammunition syndicate. The 
firms outside these four deal only in ammunition of 



136 THE "WAR TRADERS" 

small calibre or in patented articles. Their contracts 
are but the crumbs which fall from the table. In 
1893 the American armor syndicate sold armor to 
Russia for $249 a ton, while at the same time it 
charged the United States $616 a ton. This price 
cutting to Russia caused an outcry from the other 
makers of armor-plate. It led to a conference in 
Paris, at which an understanding was reached which 
put an end to such competition. Secretary Daniels 
was confronted with an example of this international 
patriotism when he set out to buy armor for the 
battleship Pennsylvania, recently launched. Re- 
ferring to his advertisement for bids for this armor, 
he writes: 1 

"When we came to the armor we rejected all the 
bids, and were then absolutely in a situation from 
which it appeared there was no relief. Though you 
cannot establish it in black and white, there is no 
doubt of an armor-plate trust all over the world. 
That is to say, the people abroad who make armor- 
plate will not come here and submit bids, because 
they know if they do our manufacturers will go 
abroad and submit bids. They have divided the 
world, like Gaul, into three parts." 

Monopoly Profits of the Munition Makers. 

The armor syndicate is active at Washington. In 
1913 the War Department purchased 7,000 4.7- 
inch shrapnel from the ammunition ring at $25.26 

1 "The World Wide War Trust" ; speech by Honorable Clyde H. 
Tavenner, House of Representatives, February 15, 1915. 



AND MUNITION MAKERS 137 

each. At the same time the government in its own 
arsenal at Frankford was able to manufacture the 
same article for $15.45. And this instance of exces- 
sive profits is not the exception. It is the rule. The 
syndicate charges $7 for a 31-second combination 
fuse, which can be manufactured in the govern- 
ment arsenal for $2.92. A short time ago, just be- 
fore the European war broke out, Secretary Daniels 
requested prices from firms in the combination on a 
certain projectile. A price of $490 was quoted. Mr. 
Daniels then asked for bids from an independent 
English firm, taking care that the syndicate should 
hear of the step. As a result, the syndicate reduced 
its price to $325, and the secretary made his pur- 
chase at that figure. When he tried to buy the same 
article after the outbreak of hostilities, however, he 
learned that the price had been raised to $425, since 
European competition was cut off. 1 

Reports have been made by two investigating 
boards at Washington, in 1896 and 1906, by Secre- 
tary of the Navy Herbert and Rear Admiral 
Strauss, the present chief of ordnance, as to the 
proper cost of armor-plate. These reports showed 
that $95,656,240 was paid by the government for 
armor-plate from 1896 to 1914 at an average price 
of $440.04 per ton, whereas in a government fac- 
tory of 20,000 tons' capacity it could be manu- 
factured at $279 per ton. The estimates of experts 

1 Speech of Clyde Tavenner, supra. 



138 THE "WAR TRADERS" 

as to the cost of armor-plate in a government fac- 
tory ranged from $193 to $314 per ton ; but at the 
high figure of $279 per ton it was stated that in 
eighteen years the government had paid $34,- 
392,981 to the private armor-plate makers that 
would have been saved by a government plant. 

In seven years we have paid $25,000,000 for pow- 
der, at a price ranging all the way from 53 cents to 
80 cents a pound, while the government in its own 
plants is producing it at 36 cents per pound, all 
overhead charges included. It is claimed that from 
$8,000,000 to $10,000,000 would have been saved 
the government had competition existed or had the 
powder been manufactured in the government plants. 

Recently the government itself took a contract 
for ammunition valued at $1,900,064, on which it 
saved $979,840. In other words, we saved approxi- 
mately $1,000,000 on a $2,000,000 order, as com- 
pared with what it would have cost had the contract 
been awarded the ammunition syndicate. 

An International Arms Trust. 

There seems to be no doubt that an understand- 
ing existed prior to the European war between the 
armament makers of the world, although this is 
where such understandings should be classed as 
treason. Not only is there no competition in 
war munitions, but international corporations exist 
for preparations for war, like the Harvey Steel 
Company and the Nobel Dynamite Trust. The 



AND MUNITION MAKERS 139 

stock of the former corporation was owned by the 
Bethlehem Steel Company of the United States, 
holding 4,301 shares, with which were united three 
other American firms; by seven of the great muni- 
tion corporations of Great Britain, with over 10,000 
shares; by two companies in Italy, and two in 
France, with 10,000 shares, and four French direc- 
tors, holding 4,000 shares; by two companies from 
Germany, Krupp and the Dillinghams, with a com- 
bined holding of 7,462 shares; and by similar hold- 
ings in the Austrian Russian, and Belgian firms. 

The Harvey Steel Company was registered in 
Great Britain as a corporation to "amalgamate or 
control four other companies holding the rights for 
the Harvey patents for treating steel." It was also 
the licensors for the Krupp and Charpy processes 
for hardening armor. Although paying handsome 
dividends, it is claimed that this company volun- 
tarily wound up its affairs after two meetings held 
in July, 1912. It is stated, however, that the or- 
ganization is not really dead, but has merely trans- 
ferred itself into some less discoverable form. 

In commenting on trade in munitions and private 
profits in this field of operations, Mr. John A. Hob- 
son, one of the leading political economists of Great 
Britain, says: 

"The recent evolution of the war trade, large 
firms swallowing up smaller firms, until practically 
the whole trade is contained within a dozen firms, 



140 THE "WAR TRADERS" 

all interconnected by cross-holdings, interlocking 
directorates, and trade agreements, is a remarkable 
exhibition of concentrated capitalism. But the 
trade differs from others in having governments 
for its chief customers. All the arts, therefore, by 
which enterprising firms get trade, by stimulating 
wants, encouraging waste, 'doctoring' tastes and 
fashions, are focussed upon governments. For the 
performance of this work, they must handle politics 
in two ways. They must evoke and feed interna- 
tional fears and animosities, and they must incite 
states to make the most expensive provisions for 
meeting the dangers they have fabricated. The 
amazing revelations of the close personal relations 
of our government and the armament firms in them- 
selves furnish such a crushing indictment that it is 
difficult to understand how our war office and ad- 
miralty can continue ladling out millions of the 
public money to these cormorants. Yet not only 
our government, but every other 'civilized' govern- 
ment, goes on building dreadnaughts and scrapping 
them, playing the gun and armor trick, the torpedo- 
boat and destroyer trick, and all the other tactics 
taught them by the trade, just as if it were all a 
clean and salutary public policy ! 

"Nor is this extravagance the worst. In the use 
of our foreign office to induce smaller or weaker 
states to play the game of war, we find a practice 
which can only be described by the term 'hellish.' 
Russia, France, Germany are equally impudent of- 
fenders. Our bad eminence is only due to the mag- 
nitude and superiority of our trade upon the one 
hand, of our fleet upon the other. The tragi- 
comedy is played upon the world-stage, its wastes, 
its crimes, its humors are widely distributed. 
'The Shame of Japan' is a recent illustration of 



AND MUNITION MAKERS 141 

how a 'newly civilized' power is dragged into the 
toils. 

"The general effect left upon my mind is not one 
of horror or of reprobation of the war traders. 
After all, they are only applying to the special cir- 
cumstances of their trade the methods common to 
all great business enterprises that are 'out for prof- 
its.' Even the falsification of news and the illicit 
'commissions' belong to the 'customs' of such 
trades, and are generally prevalent throughout the 
business world. The real criminals are the govern- 
ment departments which dare to cultivate such 
corrupt and vicious relations with these traders. 
No one who reads this analysis can possibly doubt 
that high public officials in this and other countries 
are directly and indirectly 'bought' to do this 
shameful work of squandering the resources of their 
states upon 'jobs' conceived and perpetrated in the 
interests of the private firms who 'find the money.' 
It is the most striking example of a really 'servile 
state' that modern history presents." 



CHAPTER XI 
THE CAUSE OF INCREASING ARMAMENTS 

Not only have the financiers and munition makers 
involved the world in their struggle for profits, they 
have burdened it with armaments to promote their 
private interests. Closely merged with the ruling 
classes, intimately identified with the foreign office, 
assisted by the doctrine of Lord Palmerston, that 
the flag follows the investor, and backed by an 
imperialistic press, high finance and the makers of 
war munitions have driven the countries of the 
world into ever-increasing "preparedness." 

Overseas finance is the primary cause of the in- 
creased naval appropriations, of dreadnaughts, 
cruisers, and commerce destroyers, which have bur- 
dened not only Europe but America during the past 
quarter of a century. 

The Beginning of "Preparedness." 

Present-day militarism did not have its origin in 
the Franco-Prussian War, as is commonly supposed. 
Nor are the overseas conflicts struggles for markets, 
for colonies, for increasing population that cannot 
be employed at home. The conflict and the fear 
of conflict are in large part financial. It is a con- 
flict of investors and great financiers rather than of 

142 



INCREASING ARMAMENTS 143 

manufacturers. The great profits from imperialism 
are in the field of high finance; they come from the 
making of foreign loans, and especially in the secur- 
ing of valuable concessions with the attendant 
profits that attach to such privileges. The game 
of imperialism is a struggle for privileges, not for 
the sale of goods and merchandise. For the trading 
class, powerful as it is in Germany, England, and the 
United States, is not comparable in influence with 
the great financial and banking houses, which are 
far more closely related to the ruling classes than 
are the industrial classes which in England and 
Prussia are still held in disdain. The foreign in- 
vestor and the munition maker are more largely 
responsible for the wars and the war scares of the 
past fifteen years than all the trading classes com- 
bined. 

All this seems very incredible to the ordinary 
person. How is it possible for bankers and those 
associated with bankers to exercise such an influence 
on the peace of the world ? How can financiers em- 
broil great nations in war? The reason is that the 
struggle is titanic; the sums involved are colossal; 
and the merger of government and private interests 
is so complete. That it is not set forth in state 
papers does not minimize its influence. The world 
is kept in the dark as to the silent, impersonal war 
of investors that is going on; a war which, up to 
the incoming of the present administration at Wash- 



144 THE CAUSE OF 

ington, seemed bound to involve America under 
"dollar diplomacy" in the most calamitous overseas 
entanglements that ever threatened us. Were the 
truth fully known, and could all of the consequences 
be appraised, the refusal of President Wilson to 
sanction American participation in the six-power 
loan to China would probably be held to be one of 
his greatest services to the nation and the future. 
It saved us from the kinds of consequences which 
will be described in detail in later chapters. 

Naval Appropriations in Great Britain and the United 
States. 

That the craze for armaments did not have its 
origin in the Franco-Prussian War, is seen by refer- 
ence to its beginning. The great upward sweep of 
naval expenditure began in the nineties, twenty 
years after the defeat of France. It has continued 
without cessation ever since, as investments in- 
creased in amount and the power of the investing 
classes slowly but securely enveloped their respec- 
tive governments. A comparison of naval appro- 
priations with the growth of overseas investments 
demonstrates this. 

The British expenditures for war preparations 
rose from 27,000,000 pounds in 1884 to 73,000,000 
pounds in 1913. The purchase of the Suez Canal 
shares took place in 1875 and the occupation of 
Egypt in 1882. In 1890 our own appropriations for 
the navy were approximately $20,000,000; in 1914 



INCREASING ARMAMENTS 145 

they were $140,000,000. In the latter year the 
total appropriations for the army and the navy were 
in the neighborhood of $240,000,000. 

This was the period when the great financial in- 
terests, when Wall Street, the tariff interests, and 
the railroads were ascendant in the councils of the 
nation. These were the years when navalism, 
"dollar diplomacy," and imperialism had their 
greatest influence at Washington. It was the era 
of trust formation, of high finance, of the "invisible 
government" in city, State, and nation. To all 
these interests a great navy was an essential ele- 
ment in national dignity. Privileged politics gave 
us militarism. It changed the United States from 
a nation of peace and a detachment from the war- 
ring imbroglios of the Old World into a nation verg- 
ing close upon the follies and crimes that have 
brought shame and disaster to all of the greater 
nations of Europe. 1 

The Campaign for a German Navy. 

For nearly twenty years after the Franco-Prus- 
sian War Germany was reasonably content with 
her achievements. Her energies were devoted to 
internal expansion, to the development of indus- 
try, to the unification of Germany under the ascen- 
dancy of Prussia. Her army was developed to a 

1 See speech of Clyde H. Tavenner, House of Representatives, 
December 15, 1915, " The Navy League Unmasked." It shows the 
financial connections of the officers and founders of the Navy 
League. 



146 THE CAUSE OF 

high state of efficiency. There was little belief in 
colonization or overseas possessions. 

German trading settlements in northwest Africa, 
on the north coast of New Guinea, and in the new 
British islands came under the German flag in 1884. 
New territory in East Africa was annexed the fol- 
lowing year, while in 1885 the colonial policy re- 
ceived the sanction of the Reichstag. German in- 
terests in Turkey began about 1890, and were 
rapidly expanded during the next ten years. But 
the motive of colonization was not very clear, and 
in so far as it was based on any programme it was 
that of overseas markets. 

Germany was not in a position to join in the 
scramble for financial concessions, because her capi- 
tal was needed at home. She had little surplus for 
foreign investments. Her manufacturers were build- 
ing new plants, making extensions, and developing 
new processes. 

Germany's naval programme began with the ap- 
pearance of surplus capital and the growth of her 
colonial empire about the close of the nineteenth 
century, just as England's naval programme began 
some years earlier with the purchase of the shares 
of the Suez Canal and the expansion of her overseas 
investments. China was marked out as ripe for 
dismemberment. German bankers had secured the 
Bagdad Railway concessions from 1888 to 1898. 
The colonies in South Africa had been taken over, 



INCREASING ARMAMENTS 147 

and Germany was becoming conscious of new 
dreams of empire. German trade was challenging 
that of Great Britain. A merchant marine was 
being rapidly built, and growing population at 
home gave signs of political and social unrest. 

All of these forces united to demand a big navy 
to secure for Germany a place in the sun. She 
must be consulted in the decisions of the world, in 
which prerogative Great Britain and France en- 
joyed a monopoly. When new concessions were 
being distributed, when spheres of influence were 
being parcelled out, when loans were being made, 
German financiers and German trading interests 
must be admitted to the conferences. Imperial 
dignity demanded a place in the financial parlia- 
ment of the world. International dealings were now 
being carried on in the outskirts of civilization. A 
real empire could not sit idly by and be thus ignored. 

Agitation for a Navy. 

In the agitation for a navy the Kaiser was the 
leader, but for years he preached in vain. In 1888 
naval estimates amounted to only $17,500,000. 
Ten years later they were less than $25,000,000. 
From 1898, however, naval appropriations grew 
apace. The programme of 1900 called for 38 ships 
of the fine and 14 cruisers by 1920. There were 
further additions to this in 1906, and again in 1908. 
The programmes were in fact very elastic. The 
programmes from 1908 to 1918 were based on an 



148 THE CAUSE OF 

annual expenditure of more than $105,000,000, 
more than half of it reserved for new ships and 
armaments. In 1888 there were only 15,000 sea- 
men and officers in the German navy. In 1908 
they had increased to more than 50,000.* The ton- 
nage of the navy grew from 325,000 tons in 1898 
to 893,000 in 1912. During the same period the 
tonnage of the British fleet rose from 1,695,000 to 
2,300,000 tons. 

The Navy League was formed to carry on the 
propaganda for a great navy. Although only or- 
ganized in 1898, ten years later it had a member- 
ship, individual and corporate, of over a million, 
and its growth was at the rate of 100,000 or more 
a year. Navalism was popular in Germany. It 
seized the imagination of the people. The most 
energetic workers of the League are the members of 
the reigning houses The League deluged the coun- 
try with maps and pamphlets and tables of com- 
parison of the English and German navies. It is 
always ready with ambitious ship-bui ding schemes, 
which the government takes care to disavow, but 
which, nevertheless, tend to be realized. 

Just as the Conservative and Liberal parties in 
the English Parliament are united in the foreign 
policy of that country, so in Germany a similar 
harmony is now found on the question of naval 
extension. 

1 Dawson's Evolution of Modern Germany, p. 351. 



INCREASING ARMAMENTS 149 

The Growth of War Budgets. 

The era of imperialism and foreign aggression 
began in the eighties with the occupation of Egypt 
by Great Britain. From 1870 to 1900 nearly 5,000,- 
000 square miles of territory with an estimated pop- 
ulation of 88,000,000 was added to her possessions. 
French expansion began with Algeria in 1830, but 
her colonial ambitions began in the eighties when 
France was crowded out of Egypt by Great Britain. 
Within a few years she added to her possessions, 
mostly in northern Africa, 3,500,000 square miles 
of territory, mostly tropical, with a population of 
37,000,000. Germany's colonial development be- 
gan at the same time. The first colonial society 
was organized in 1883. Cameroon in northwest 
Africa, Kaiser Wilhelm Land and the Bismarck 
Archipelago and other territory in East Africa 
were annexed in 1884 and 1885 as were certain Pa- 
cific islands. From 1884 to 1899 Germany brought 
under her domination 1,000,000 square miles of ter- 
ritory containing a population estimated at 14,- 
000,000. 

These were the years which saw the beginning 
of financial imperialism; they were years in which 
practically the whole undefended, uncivilized world 
fell under the control of the greater powers. In these 
years, too, the new "preparedness " had its beginning; 
the "preparedness" beside which the expenditures 
of the previous twenty years were insignificant. 



150 



THE CAUSE OF 



That the controlling influence in the increase in 
armaments in recent years has been the financier, 
concession seeker, and expansionist is seen by an 
examination of the following tables: 1 



I. EXPENDITURES ON ARMY 





British 


German 


Excess 
(German) 


1893 


pounds 
18,359,000 
20,511,000 
37,944,000 
28,320,000 
27,760,300 


pounds 
30,127,000 
31,635,000 
32,446,000 
38,274,000 
39,930,100 


pounds 

11,768,000 

11,124,000 

5,498,000 

9,954,000 

12,169,800 


1898 


1903 

1906 

1911 



II. EXPENDITURES ON NAVY 



1893 
1898 
1903 
1906 
1911 



British 



pounds 
14,215,000 
26,070,000 
36,702,000 
32,061,000 
40,603,700 



German 



pounds 

4,062,000 

6,299,000 

10,478,000 

13,335,000 

22,431,000 



Excess 
(British) 



pounds 
10,153,000 
19,771,000 
26,224,000 
18,726,000 
18,172,700 



III. TOTAL EXPENDITURES, INCLUDING DEBT 

CHARGES, BRITISH AND GERMAN 

ARMY AND NAVY 





British 


German 


'Excess 
(British) 


1893 


pounds 
58,588,000 
72,081,000 
102,186,000 
89,451,000 
92,864,000 


pounds 
37,448,000 
41,548,000 
47,995,000 
57,986,000 
76,342,600 


pounds 
21,140,000 
30,533,000 
54,231,000 
31,465,000 
16,519,400 


1898 


1903 


1906 

1911 





Lawson, Modern Wars and War Taxes, p. 134. 



INCREASING ARMAMENTS 151 

War Expenditure of the Powers. 

Another table, showing the expenditures of all 
the military powers on army and navy, aggregate 
and per head, in selected years from 1902 to 1911, 
has been compiled by a German writer, Karl Radek. 1 
It is as follows: 



Germany maeks 

MARKS FEB HEAD 

1902 874,536,000 15.08 

1907 1,097,714,000 17.59 

1911 1,259,029,000 19.16 

Great Britain 

1902 1,218,300,000 29.07 

1907 1,178,308,000 27.00 

1911 1,452,483,000 32.14 

France 

1902 827,202,000 21.18 

1907 910,127,000 23.21 

1911 1,052,111,000 29.56 

Russia 

1902 958,015,000 6.94 

1907 1,065,631,000 7.30 

1911 1,285,328,000 8.37 

Austria 

1902 401,604,000 8.69 

1907 442,737,000 9.18 

1911 548,800,000 10.55 

Italy 

1902 282,573,000 8.64 

1907 371,298,000 9.87 

1911 472,583,000 13.58 

United States 

1902 860,164,000 10.87 

1907 1,085,572,000 12.61 

1911 1,094,020,000 11.18 

Japan 

1902 180,113,000 3.92 

1907 416,464,000 8.46 

1911 387,245,000 7.49 



1 Der deutsche Imperialismus und die Arbeiterklasse. 



152 INCREASING ARMAMENTS 

During the eighteen years from 1893 to 1911 
British expenditures for the army increased by 51 
per cent., while the expenditures for the navy were 
increased nearly threefold. The expenditure of 
Germany for the army has increased by 33 per 
cent, and for the navy by over 500 per cent. 
The increase has been most rapid since 1900. In 
ten years, from 1903 to 1913, the naval expendi- 
ture of the six great European powers grew from 
$390,000,000 to $720,000,000, while the total ex- 
penditures for the army and navy have increased 
from $1,135,000,000 to $1,910,000,000 The years 
which followed the Franco-Prussian War were years 
of almost negligible preparedness in comparison with 
those which preceded the present European war. 

Navalism and militarism are a product of over- 
seas investments. The colossal burdens of the war- 
ring nations are the direct result of the extension 
of high finance into the world at large. The ruling 
classes have sent the flags of their respective coun- 
tries to protect their investments. 



CHAPTER XII 
t THE MIND OF WARRING EUROPE 

War has changed in character as have the rela- 
tions of nations. The causes of the wars of Frederick 
the Great and Louis XIV were not different from 
those of Napoleon or Bismarck. They were waged 
for the extension or defense of boundaries, the round- 
ing out of territory, the freeing of groups from for- 
eign dominion. Such issues are of secondary im- 
portance in present-day wars. They scarcely figured 
in the Boer War, the Russo-Japanese War, or the 
present European war. Present-day wars are born 
of forces unknown even to Bismarck. They spring 
from conflicts of classes whose power is new to the 
world. New economic classes now control the des- 
tinies of Europe, and they control them in their 
own interests no less completely than did the feudal 
classes with which they have come to be more or 
less indistinguishably merged. 

This merger of the feudal aristocracy of the 
eighteenth century with the financial aristocracy 
of the twentieth century is a fact of most porten- 
tous consequences. The merger is both economic 
and political. And as a result of this merger new 
economic classes now rule Europe almost as com- 

152 



154 THE MIND OF WARRING EUROPE 

pletely as did the feudalism of the seventeenth cen- 
tury. 

The War Caste. 

In this new feudalism of land and finance land 
monopoly is the ultimate basis of power. It lies 
back of the political and social position of the ruling 
caste. It gives it permanence. It binds it to the 
past. And despite the wealth and power of the finan- 
cial classes, the control of Europe, outside of France 
and Italy, is in the hands of the nobility, whose 
interests have widened from a narrow nationalism 
into a financial imperialism which encompasses the 
whole world. This change in the interests and the 
outlook of the ruling classes has been generally 
overlooked by political writers. Yet without this 
merger war would be difficult, if not impossible. 

The feudal aristocracy is still the war caste. This 
is true of all the powers except France, England, and 
Italy. It is a caste apart. It thinks of itself as it 
did in earlier centuries. From this class come the 
officers of the army and the navy. War is its 
calling, and it thinks almost exclusively in terms of 
its profession. Trained for war and thinking of war, 
it looks forward to the day when its training and 
its perfected engines of destruction will be put to 
use; when it will be called upon to display the cour- 
age, the devotion, and the sacrifice that have been 
extolled as the highest of all human virtues. 

This is the first element in the mind of warring 



THE MIND OF WARRING EUROPE 155 

Europe. It is a mind which views democracy with 
contempt, which places little value upon human 
life, which thinks of the state as something separate 
and apart from the people, and for the preservation 
of which the peasant and the workman are but 
fodder for guns. 

The old feudal caste is also the diplomatic caste. 
It, too, thinks in terms of war as the natural and 
only method for the settlement of disputes. Diplo- 
macy is another expression of the feudal idea of 
the state in which the ambassador and the foreign 
office are but the representatives of the King, the 
Emperor, or the Czar. These attributes of the old 
order have continued down to the present day, 
almost untouched by the industrial changes and 
revolutions of the nineteenth century. 

All this has created a narrow militaristic psychol- 
ogy. But it affects all of the upper classes, because 
it determines the opportunities for advancement, 
for social and political distinction. And this caste 
psychology lies back of the mind of political and 
diplomatic Europe. It is a psychology that is 
responsible for war and preparations for war. 
It believes in war, and refuses to accept the sug- 
gestion of tribunals for the arbitrament of inter- 
national disputes. It is a psychology so different 
from that of the ordinary man interested in his 
daily work, in trade, in art and literature, that it 
is almost as difficult to understand as are the cus- 



156 THE MIND OF WARRING EUROPE 

toms of some savage tribe. The mind of central 
Europe, Russia, Austria-Hungary, and Germany is 
in these essentials the mind of the feudal state 
modified to some extent by the industrial and polit- 
ical changes of the nineteenth century. 

The New Feudalism of Land and Capital. 

The identification of the old aristocracy with 
war, rulership, and diplomacy does not of itself ex- 
plain the wars which have convulsed Europe during 
the past quarter of a century. Continued peace 
might have been possible had industrial conditions 
remained as they were at the end of the Franco- 
Prussian War. But economic relations have been 
revolutionized during the past forty years. 

In Great Britain, Germany, and France, and to 
some extent in Austria-Hungary, the rapid develop- 
ment of industry has given birth to a new class 
whose power is derived from finance and commerce. 
This class is strongest in Great Britain and Ger- 
many, in which countries industry is most highly 
developed. And this class has been merged with 
the landed aristocracy. The merger is not so com- 
plete in Germany as in Great Britain, for Ger- 
man industry is of comparatively recent origin. It 
dates back only to the Franco-Prussian War. 

A new feudalism has been created through this 
merger of classes. There is still class conflict as to 
internal domestic policies. In Great Britain the con- 
flict is seen in the struggle between the Conserva- 



THE MIND OF WARRING EUROPE 157 

tive or landed party, and the Liberal or commercial 
party; it is seen in Germany between the Conserva- 
tive or agrarian party, and the National Liberal or 
capitalistic party. The struggle is primarily over 
protective tariffs, taxation, and economic policies. 
In Great Britain the difference between the parties 
expresses itself over the Irish question, over dises- 
tablishment, over the power of the House of Lords, 
and the land question generally. In Germany the 
internal struggle is not so acute as in Great Britain, 
and the Conservative and National Liberal parties 
are frequently found working in unison. 

But whatever the conflict as to domestic policies, 
the old aristocracy and the new are a unit as to 
foreign affairs. They are a unit through an identity 
of economic interests. In Great Britain both classes 
are united as to the control of the Mediterranean, 
on the partition of Persia, on the Morocco incident, 
and the policy to be followed toward Germany in 
her expansion into Turkey and Asia Minor. The 
same unity is found in Germany, though for some- 
what different reasons. The National Liberal party 
is the party of the great captains of industry of the 
lower Rhine region, and especially of the iron, steel, 
and munition makers, which have grown so rapidly 
during the past generation. This is the industrial 
centre of Germany. It is the source of much of 
her wealth and industrial power. And the National 
Liberal party would have very much greater political 



158 THE MIND OF WARRING EUROPE 

strength were it not for the unfair distribution of seats 
in the Reichstag, the power of the Bundesrath, and 
the position which the Junker enjoys under the con- 
stitution of Prussia. But aside from political parties, 
all Germany recognizes that the manufacturing and 
trading classes have made Germany the world power 
that she is. Even her military strength is traceable 
back to industry. It not only supplies her munitions, 
it supplies her finance as well. Industry, not agricul- 
ture, is the chief source of Germany's strength. 

Economic Needs of Germany. 

And just as both classes are a unit in Great Brit- 
ain as to colonial and imperialistic policies, so in 
Germany there is agreement between the feudal 
and manufacturing classes as to the foreign policy 
of that country. It was the concessions of iron-ore 
mines in Morocco to the great iron and steel syn- 
dicates, the Krupps and the Mannesmanns, that in- 
fluenced Germany's policy in that country; it was 
the desire for similar concessions for railways, mines, 
and raw materials that promoted the Bagdad Rail- 
way and political penetration into Turkey. And it 
is quite possible that the military operations of the 
present war were shaped in part by the necessities of 
the industrial classes of the lower Rhine region, 
rather than by the military caste. 

Germany has only limited deposits of iron ore 
and coal. They are said to approach exhaustion 
in from thirty to fifty years. The Krupps and 



THE MIND OF WARRING EUROPE 159 

Mannesmanns had secured iron-ore concessions in 
Morocco which they desired to hold. Similar de- 
posits are found in Turkey and Asia Minor. And 
the invasion of Belgium and the occupation of the 
territory of northern France may have been inspired 
by the same motive. For Belgium contains valuable 
iron ore and coal deposits. They are easily acces- 
sible to the great industrial regions of the lower 
Rhine. The same is true of northern France. The 
territory already occupied contains three-quarters 
of the iron and coal fields of the latter country. 1 

Germany's military strength lies largely in her 
munition makers. It would be strange indeed if 
Germany did not go to any lengths to insure to this 
industry, to her railroads, her navy, and her mer- 
chant marine, a safe and sure supply of iron ore and 
coal for all future times. The desire for northern 
France, for Belgium, the readiness to hazard the 
good opinion of all the world to secure them may 
explain the drive through Belgium. It was a drive 
for coal and iron, as well as an attack upon Paris 
and Calais. For without new sources of raw ma- 
terial, Germany might be helpless before the world. 
Viewed in this light, German initiative in the war 
and the strategy employed are but a continuation 
along new lines of the aggressions against Denmark 
in 1864, against Austria in 1866, and against France 

1 This suggestion has been elaborated by H. N. Brailsford in The 
New Republic, December 18, 1915. 



160 THE MIND OF WARRING EUROPE 

in 1870. They are aggressions for completed na- 
tionalism on an industrial as well as a race basis. 

In this military and foreign policy the Junker 
and the commercial classes are united. Whatever 
the domestic conflicts of the agrarian and the in- 
dustrial classes may be, they are a unit in the neces- 
sity for securing territory that would free the nation 
from a menace of exhaustion of iron and coal. And 
if the German campaign is studied from this point 
of view it becomes perfectly consistent; first a drive 
to the west and the establishment of a line beyond 
the desired possessions; then a drive to the south- 
west through the Balkans to Turkey for the same 
purpose. For Germany has secured from Turkey 
the most valuable concessions for minerals and other 
resources together with great land grants capable of 
producing cotton and wheat for her industrial and 
domestic needs. 

Other German Aims. 

But this is only a part of the psychology of the 
present war. It has endless ramifications. Ger- 
many insists on the freedom of the seas, especially 
of the Mediterranean; she desires the freest possible 
access to trading colonies now actually or potentially 
closed against her by the action of Great Britain and 
France. Germany desires to perfect the agencies 
of trade and commerce so that her superior indus- 
trial organization will enable her to reap the full 
returns on the preparations that have been made 



THE MIND OF WARRING EUROPE 161 

during the past forty years, in which preparations 
every class has had a share. Even the German 
schoolmaster, the university professor, the scientist, 
the health officer, and the expert in every line of ad- 
ministration is identified with the programme, and 
is personally interested in seeing the result of his 
work in the army which he has aided in preparing. 
Consciously or unconsciously all these classes have 
had the Fatherland and its destiny before them in 
the foundations they have been laying during the 
past generation. 

Great Britain. 

The psychology of Great Britain is not so clear. 
Her army and navy are officered from the same 
class that officers the German army. More than 
anything else Great Britain desired the maintenance 
of the status quo. She had secured the choicest 
places on the earth's surface; she had encircled 
the Mediterranean, she was recognized as ascendant 
in Egypt and the Orient, in South Africa and the 
West and East Indies. She had nothing to gain by 
war and much to lose. And her national psychology, 
like that of Germany, was a merger of the mind of 
old aristocracy, which is the financial and ruling 
class and the ship owners, the bankers, the trading 
classes, and the powerful manufacturing class of the 
middle of England whose trade is identified with the 
strategic places that now control the maritime routes 
of the world. And the merger of the landed and 



162 THE MIND OF WARRING EUROPE 

financial groups in Great Britain is even more close 
than it is in Germany. It is a merger cemented by 
marriage, by a more evenly balanced political power 
between the Liberal and Conservative parties, and 
by a public opinion that thinks in terms of world em- 
pire. There is no agrarian mind in England as in 
Germany; although the landed aristocracy owns far 
greater estates than in the latter country. For land 
in England is not primarily a source of wealth. It 
is rather a hall-mark of social distinction. Agricul- 
ture is a vanishing pursuit, occupying a smaller and 
smaller percentage of the people. The real economic 
forces of Great Britain are financial. And one- 
fourth of the income of the investing class is said to 
come from overseas investments. And as the invest- 
ing class is the landed class and the shipping and 
munition-making class, the merger with the govern- 
ment is quite as complete as in the autocratic coun- 
tries of the continent. 

In France the imperialistic policy is based on the 
fact that the peasant is the investor. Overseas in- 
vestments are made up of the small accumulations 
of the peasants and middle classes. This gives a 
democratic quality to her foreign policy. In Russia 
and Austria there is no such composite mind as in 
the other countries. For these countries are ruled 
by the old aristocracy. Imperialism is narrow and 
militaristic, and is bent on the control of the Bal- 
kans and Turkey with outlets on the Mediterranean. 



THE MIND OF WARRING EUROPE 163 

This is the motive of Austrian foreign policy; it 
has been the motive of Russian policy for centuries. 

Only in Germany, Great Britain, and France is 
the imperialistic mind the mind of the nation. In 
Germany it is a combination of the Junker, of indus- 
try, of finance; in Great Britain it is landed, financial, 
industrial, and maritime; in France it is a slumber- 
ing desire for the recapture of Alsace-Lorraine, for 
the humbling of Germany, the protection of billions 
invested in Russian bonds, the maintenance of con- 
cessions in the Balkans and the Near East, and the 
preservation of the colonies on the Mediterranean. 
In all of these nations the war mind is economic. 
It is neither racial, nationalistic, nor dynastic. It 
is a desire for industrial autonomy and expanded 
trade or the preservation of the privileges, monop- 
olies, or concessions that have been acquired during 
the past forty years. To these groups have been 
added the powerful industrial groups interested in 
the making of munitions and battleships. They, 
too, are almost indistinguishably merged with the 
ruling classes and financial houses, with the press 
and the army and navy, all of which are a unit for 
war preparedness and military expenditure. 

These are the classes that make the mind of 
Europe. These are the economic forces that have 
created the new imperialism. But only in so far 
as these classes have been able to mould public 
opinion is there an imperialistic or militaristic 



164 THE MIND OF WARRING EUROPE 

psychology on the part of the people. They are 
for the most part swept along by the ruling classes, 
which have identified their personal and private in- 
terests with the interests of the state. 



CHAPTER XIII 

THE BEGINNINGS OF BRITISH IMPERIALISM 
AND THE OCCUPATION OF EGYPT 

Financial imperialism, as distinguished from 
colonial expansion, is a recent development. It 
had its beginnings in Great Britain with the ap- 
pearance of surplus capital seeking investment. 
During the first half of the last century English in- 
dustry developed very rapidly. With the repeal of 
the corn laws her foreign trade penetrated to every 
quarter of the globe. The Manchester school of 
thought, with Cobden and Bright as its leaders, 
was dominant in politics, and the country had lit- 
tle desire for further conquests. The great manu- 
facturers were, of course, always on the lookout 
for new markets, but they generally realized that 
annexation was of little value for trade purposes. 
Theirs was the liberal policy of free trade and the 
not altogether disinterested desire to see other 
peoples prosperous. The trading classes considered 
war a waste, new sources of trade a national gain. 
The domestic policy of the country was largely 
guided by the great manufacturing interests in 
control of the Liberal party. Cobden and Bright 

165 



166 BRITISH IMPERIALISM AND 

were the strongest of peace advocates, and held 
that protective tariffs were one of the main causes 
of war. And the foreign policy of England re- 
flected this point of view. 

This policy of the merchant classes was a policy 
which made for peace on the whole, although it did 
not consistently keep the country out of war. In- 
deed the war with China, 1839-42, was one of the 
most disgraceful wars England ever engaged in. It 
was a trade war, one of its chief aims being to force 
China to accept the opium trade, which China had 
sought to ban. It resulted in the Treaty of Nankin 
in 1842, by which Hong-Kong was ceded to England, 
together with an indemnity of 6,000,000 pounds, 
while five ports, including Canton and Shanghai, 
were opened to the trade of the world. On the 
whole, there was little interest in foreign affairs, 
the energies of the country being bent on industrial 
development and questions of domestic policy. 

During the third quarter of the century England 
was involved in the Crimean War and a number of 
smaller wars, but they were not yet the wars of 
financial imperialism that were to come later in the 
century, strongly as the Piraeus incident of Lord 
Palmerston, referred to earlier, might suggest such 
an attitude. The Crimean War was due largely to 
the character and disposition of four English noble- 
men, and its purpose was to keep Turkey out of the 
hands of Russia. 



THE OCCUPATION OF EGYPT 167 

The Beginning of Financial Imperialism. 

The second period in England's foreign policy in 
which financial considerations guided the govern- 
ment began about 1875, with the secret purchase by 
Disraeli of the Suez Canal shares. The wars that 
followed, especially the Boer War, and the diplo- 
matic manoeuvres involved in keeping the "balance 
of power" and in overseas negotiations, were in- 
spired in great part by questions of foreign invest- 
ment. About 1882 the movement began for the 
acquisition of colonies, particularly in Africa, on the 
part of nearly all the European nations, the growth 
of armaments in all the more important countries, 
and the bitter feeling between them. From 1870 to 
1900 Great Britain added to her possessions and 
"spheres of influence" no less than 4,750,000 square 
miles, with an estimated population of 88,000,000. 
The last decade of the nineteenth century witnessed 
the coming of the new diplomacy, the new era of 
financial wars, and the controlling influence of the 
financial powers. It was also the period of increas- 
ing armament born of overseas investments. 

Whatever the value of Egypt and the Suez Canal, 
Great Britain has had to pay a heavy price for it. 
It cost her first the confidence and friendship of 
France, and later was a continuing cause of hos- 
tility on the part of Germany. It marked the be- 
ginning of the new imperialism with the colossal bur- 
den of armaments which it involved to all Europe. 



168 BRITISH IMPERIALISM AND 

It led to several wars with the Egyptians, to the 
subsequent expansion of British ambitions in the 
Mediterranean, and the development of the policy 
of "spheres of influence" in West Africa and the 
Near East on the part of the contending powers. 
All of these forces might have been set in motion, 
and all of these suspicions and jealousies enkindled 
by other influences, but they had their origin in 
England's aggressions in Egypt, which have been 
followed by endless diplomatic and other contro- 
versies covering a period of thirty-five years. 

Egypt and the Dual Control. 

The secret purchase in 1875 of 176,000 shares of 
the Suez Canal for 4,000,000 pounds may be taken 
as the first instance of the new imperialism on the 
part of any of the powers. To Disraeli belongs the 
responsibility for this purchase, which has proved 
a brilliant success from a financial point of view, 
for the shares now yield about 25 per cent, on the 
investment. England's purchase of the shares was 
facilitated by Disraeli's friendship with the city, and 
particularly with the banking-house of Rothschild. 
The French held the remainder of the 400,000 
shares in the canal. 

For years before the purchase French influence had 
been dominant in Egypt and much French money 
had gone toward the development of the country, 
especially during the reign of Khedive Mehemet Ali. 
Following the purchase the English began to invest 



THE OCCUPATION OF EGYPT 169 

great sums in Egypt. They found it a lucrative 
field. The Khedive Ismail (1866-79) was a spend- 
thrift, who contracted huge debts both for his own 
use and for public enterprises. European contractors 
overcharged him from 80 to 400 per cent, on construc- 
tion works, and his creditors sometimes got as much 
as 25 per cent, interest on their loans to him. Of a 
loan of 32,000,000 pounds which he raised in 1873 
only 20,000,000 ever reached the exchequer, the 
rest melting away in commissions to bankers, etc. 
Egypt now fell under the dual control of Great 
Britain and France. The French and English diplo- 
mats knew of these usurious loans and supported 
them. The Egyptians were taxed to the limit of 
their capacity to pay, but Ismail could not guar- 
antee payment of the interest. The 90,000,000 
pounds of English and French money which had 
been recklessly poured into Egypt's public debt be- 
gan to look insecure. Had the country had a con- 
stitution, or Ismail been of a different character, or 
the interest on the debt been less exorbitant, Egypt's 
finances would not have been wrecked. Nor would 
there have been any excuse for foreign occupation. 
The first two of these difficulties were overcome 
by the deposition of Ismail in 1879, some years 
before the occupation, but the interest on the for- 
eign loans was not reduced till after the English 
occupation, under the regency of Lord Cromer. 
After the fall of Ismail, Tewfik, a puppet Khedive, 



170 BRITISH IMPERIALISM AND 

was supported by the British Government against 
the Nationalist party, which had risen in Egypt 
under the military leadership of Achmet Arabi 
Pasha. The Egyptian Nationalists wanted only 
a genuine constitutional government and freedom 
from European control, wherein they resembled 
the Young Turk party in Turkey. They did not 
dispute the public debt or repudiate its payment. 
Although Arabi and his army were backed by the 
Egyptian Parliament, England declared him a 
rebel. Arabi was defeated by the English in 1882 
at Tel-el-Kebir, a battle which Achille Loria, the 
Italian economist, describes as the most brilliant 
ever bought with money. Yet for many years 
after the occupation in 1882 England asserted that 
her purpose in holding Egypt was to prepare the 
natives for self-government. The fact was, it would 
have been "bad business" for the English capital- 
ists to have a strong Nationalist government in 
Egypt. 

The Era of Exploitation. 

Meanwhile the dual control had been quite as des- 
potic as any Khedive. In the year 1877, a year 
of famine, taxes were collected in advance from the 
ruined peasants, in order that the usurious interest 
might be met. For the same reason many officers 
of the native army were dismissed with eighteen 
months back pay unpaid. The English and French 
supported the Khedive because they knew they 



THE OCCUPATION OF EGYPT 171 

could not have the same control over a Nationalist 
government. Arabi was denounced as a rebel, and 
a riot and massacre just before the occupation 
offered an opportunity to discredit his party, al- 
though, as was charged, the riot was instigated for 
this very purpose by the backers of the Khedive. 
Ships had been sent to Alexandria by England, 
ostensibly to protect European lives, which were, 
however, more menaced than protected by their 
presence. There was no disorder in the country 
warranting foreign interference, yet Alexandria was 
bombarded and the English occupation begun. 
"The 12-per-cent. interest carried the day/' says 
Mr. Brailsford. French ships were in the harbor at 
the time, but they weighed anchor while the British 
ships were in action. 

For years Gladstone and the Liberals declared the 
intention of evacuating Egypt. The occupation it- 
self was contrary to the Liberal principles with 
which Gladstone had entered office, yet that occu- 
pation was one of the most important acts of his 
administration. The party was soon won around 
to imperialism, until only the radical wing was 
left to protest. We find Cecil Rhodes declaring he 
would subscribe funds to his (the Liberal) party only 
if some of the "idealists" in the radical wing stopped 
talking nonsense about evacuating Egypt. So the 
Liberal party became imperialistic, with Lord 
Rosebery and Sir Edward Grey as the future leaders 



172 BRITISH IMPERIALISM AND 

of its foreign policy. Lord Rosebery was connected 
by marriage with the Rothschilds, who were, of 
course, vitally interested in seeing the continuance 
of the protectorate. Instead of evacuating Egypt 
the British went on farther to the Soudan and be- 
gan to dream of the Cape to Cairo Railway. 

Vast amounts of capital, nearly all British, have 
since been invested in Egypt. New shares were 
issued in limited companies in the year 1905 to a 
total of over ISOjOOO^OO. 1 Besides this there are 
many other forms of investment by individuals, 
contractors, etc. The aristocracy is well represented 
in these investments. Lord Milner is chairman of 
the new bank in Egypt and Sir Ernest Cassel, a 
personal friend of the late King, has large interests 
there also. It would be disadvantageous for these 
investors to have real self-government in Egypt. 
Their interests would not be so well protected by a 
native parliament, even if it consisted of large land- 
owners, and they could not hope to run the politics 
of the country against a great native majority. So 
the elective councils which have been conceded to 
the Egyptians have little real power. Native gover- 
nors have British "advisers," who are in reality 
commanders. Even should self-government at any 
time be granted, English capital in Egypt would 
demand for itself votes and representation. 

The practices and policies adopted by England 

} Brailsford, The War of Steel and Gold, p. 118. 



THE OCCUPATION OF EGYPT 173 

in the subjection of Egypt have since become the 
established practices of Europe. With slight vari- 
ations they have been applied by the French in Mo- 
rocco, by Germany in her colonial possessions, and 
by England in South Africa, Persia, and elsewhere. 

Alliances, "Ententes," and Increased Burdens of Arma- 
ment. 

The policy begun with the occupation of Egypt 
had momentous consequences. In a sense it marked 
the beginning of the new imperialism. France, 
irritated by the purchase of the canal shares, never- 
theless co-operated with England throughout the 
dual control. She took no part, however, in the 
bombardment of Alexandria and resented the per- 
manent occupation of Egypt by England. From 
1882 till the formation of the entente cordiale in 
1903 France and England were hostile. France 
turned to Russia for support and made that coun- 
try a loan of 500,000,000 francs (1888) to mark the 
rapprochement. 1 England's two-power naval policy 
dates from this time, born of the fear that she 
might have to fight France and Russia at the same 
time. 

The occupation of Egypt had an effect in another 
direction. It had been decided by the nations that 
a Turkish army, if any, was to invade Egypt. When 
England took that task upon herself she forfeited 
much of her influence in Turkey, where she was 

1 Fullerton, Problems of Power, p. 46. 



174 BRITISH IMPERIALISM AND 

superseded by Germany, which country has since 
been dominant. The friction with France cul- 
minated in the Fashoda incident, when Major 
Marchand threatened the hold of the English on 
the upper Nile. But France soon recognized the 
futility of opposition to Great Britain, and the two 
countries reached an agreement in 1903, whereby 
France's interests were recognized as paramount in 
Morocco and England's dominion in Egypt was 
acknowledged. There was also a secret agreement 
that England was to give "diplomatic support" 
to France, should the latter find it necessary to 
occupy Morocco. Germany was angered by the 
agreement, especially by the secret clause in it, 
which soon became public. 

From this time also dates the tension between 
England and Germany. Germany felt she had 
been wronged in not being consulted about Morocco, 
that the entente had a broader meaning than the 
mere disposition of Morocco, that the other powers 
intended to isolate her and exclude her from "places 
in the sun," to which she could extend her sphere 
of influence. At any rate, Germany determined 
that her strength should be so great that no more 
territory like Morocco could be disposed of without 
her consent. Russia and France increased their 
armaments. Great Britain's expenditures for war 
preparation rose from 27,000,000 pounds in 1884 to 
73,000,000 pounds in 1913. 



THE OCCUPATION OF EGYPT 175 

Great Britain has never had to go to war for 
Egypt, but a great proportion of her war expendi- 
tures have been due to the policy begun there. 
The jealousies and fears growing out of the Egyptian 
control have been a cause of many war scares, all 
of which served to create fresh expenditures on 
armament and increase the bitterness between the 
nations. The two groups of European nations 
engaged their energies in a struggle for the "balance 
of power," a struggle which is still going on. In 
trying to preserve this balance each group is really 
aiming to turn the scales just a little in its own 
favor. When the entente was able to do so it ex- 
tended its sphere of influence over Morocco, Egypt, 
Persia, and along the Yang-tse River. When 
Germany was ascendant she encouraged France 
in Tunis, French dominion having been recog- 
nized there in the Treaty of Bardo, 1881, for the 
purpose of alienating Italy from France and for 
securing greater influence in Turkey and Asia 
Minor, in which countries the financiers and im- 
perialists of Germany were most vitally interested 
in preserving their influence. 1 

1 Fullerton, Problems of Power, p. 45. 



CHAPTER XIV 
FRANCE AND THE MOROCCO INCIDENT 

The overseas expansion of France differs some- 
what from that of Great Britain and Germany. 
The French have never emigrated in large numbers, 
as have the other peoples of Europe. They are not 
colonists. This is due partly to the French char- 
acter, but largely to the wide distribution of land in 
France, which has identified the people with home 
ownership and maintained a high standard of liv- 
ing. Moreover, France is not an industrial country; 
her trading interests have not been highly devel- 
oped, nor has her merchant marine. Democracy, 
too, has tempered the aggressiveness of the finan- 
cial and trading classes, while the ruthless search- 
light of radical parties and a free press have checked 
the imperialistic classes in their foreign aggressions. 

France is, however, an investing country on a 
large scale. Her foreign investments are second 
only to those of Great Britain and amount to ap- 
proximately $8,000,000,000. And her foreign policy 
is largely shaped by these investments, while her 
internal life has suffered seriously from the activ- 
ities of the great financial houses which in the 

176 



FRANCE AND THE MOROCCO INCIDENT 177 

opinion of many are the most corrupting influence 
in the government. Certainly they have shaped the 
life of France to disastrous ends. 

The French Investor. 

The French investor differs from the British in- 
vestor in this: the French investor is the peasant, 
the tradesman, the middle class, whose individual 
savings are gathered together by the banking in- 
stitutions and finally lodged in the financial institu- 
tions of Paris for investment. These banking in- 
stitutions, by their intimate influence with the 
government and otherwise, determine the kind of 
investments into which the savings shall go. And 
by so doing they influence and often determine the 
ultimate foreign policy of the nation. For the 
government, whatever the composition of the min- 
istry may be, is always responsive to the interests 
of the peasant and middle classes which form the 
ruling class in the state. The banks have used the 
powers enjoyed primarily for their own interest. 
They have diverted investments into those secur- 
ities where they, the banks, would secure the largest 
commissions and concessions, which, however, did 
not go to the investor. The investor secured fixed 
rates of interest which, in the case of foreign loans, 
were higher than those at home. This made the 
foreign loans attractive. And the financial institu- 
tions are largely responsible for the unfortunate 
expansion of France into Tunis and Morocco, as 



178 FRANCE AND THE MOROCCO INCIDENT 

well as for imperilling thousands of millions of sav- 
ings invested in the securities of Russia, Turkey, 
and the Balkan states. 1 

But this is not all. Overseas investment has 
made the French peasant an imperialist. It has 
linked him with autocratic Russia. It has identified 
the nation with the maintenance of the balance of 
power, the integrity of the Balkans, the preservation 
of French interests in Turkey, and the maintenance 
of control by France or a friendly nation of Mo- 
rocco and the Mediterranean. Were it not for 
these investments France would be far less imperial- 
istic than she is. There would be far more opposition 
to militarism and the alliance with Russia. 

By reason of the wide distribution of foreign in- 
vestments the French people are more closely iden- 
tified with the foreign policy of their government 
than are the people of any other power. But these 
very investments have brought misfortunes and 
weaknesses upon the nation that might have been 
avoided. They are internal as well as external. 
France has been weakened by the export of capital. 
Money that should have been invested in internal 



1 In October, 1912, during the Balkan scare no country was so 
anxious to maintain peace as France. More than one hundred 
million francs of French capital had been lent to Roumania, Bul- 
garia, and Servia. M. Alfred Neymarck, vice-president of the 
French Society of Political Economy, stated in January, 1913: 
"France possesses at present in foreign state bonds and foreign 
securities 40 milliards of francs, paying an annual interest of about 
2 milliards." — Fullerton, Problems of Power, p. 3. 



FRANCE AND THE MOROCCO INCIDENT 179 

improvements, in the building of railroads and 
canals and industrial promotion has been used in 
the development of foreign lands through the hope 
of higher returns. 

The Beginning of French Colonial Policy. 

The colonial policy of France, however, was not 
inspired by financial motives. It began in North 
Africa in the years which followed the war with 
Germany. It was encouraged by Bismarck, who 
felt that the more completely France was occupied 
with colonial enterprises the less concerned the 
people would be with revenge and the recovery of 
Alsace-Lorraine. And the rapid recovery of France 
from the war with Germany enabled her to enter 
on an aggressive colonial policy. 

The purchase of the shares in the Suez Canal by 
Disraeli and the subsequent expansion of British 
influence in Egypt crowded France into other fields. 
Algeria had been occupied since 1830. French in- 
fluence gradually developed in this territory until 
to-day it includes 342,500 square miles. Tonking 
and Laos in Asia were acquired in 1880, and Senegal, 
Sahara, and Tunis in North Africa about the same 
time. Through the absorption of Tunisia (1881) 
50,000 square miles were added to her possessions. 
Exclusive of the expansion in New Caledonia, 
France acquired during these years over 3,500,000 
square miles of territory, almost all tropical, with 
a population of 37,000,000. 



180 FRANCE AND THE MOROCCO INCIDENT 

Conflicting Claims in Morocco. 

In Morocco, which lies to the west of Algeria and 
controls the Atlantic and Mediterranean seacoast 
west and east of Gibraltar, the task was more diffi- 
cult than in Tunis to the east, for here there were 
conflicting claims by England, Germany, and Spain, 
all of a questionable character but still of sufficient 
importance to form the basis of diplomatic nego- 
tiations and trouble. The claims of Spain were 
based on grants and concessions which were vitalized 
into value by France in her efforts to make use of 
them in her designs of "peaceful penetration" into 
Morocco. German interests were of later origin. 
But they were far more solid than was generally 
admitted at the time of the Panther incident. 
She had participated in the Morocco Conference 
in 1880 which had resulted in agreements for the 
equal treatment of all countries in the trade of the 
country which Convention it was that made Mo- 
rocco a question of international interest. In 1890 
Germany and Morocco entered into a treaty by 
which the former country was granted the same 
trading and commercial rights as those enjoyed by 
the most favored nations. It was a treaty which 
insured the open door. As the result of these Con- 
ventions Germany's interests in Morocco grew 
rapidly, as did her financial activities. In addition 
to being interested in the national bank, the to- 
bacco monopoly, the Krupps and Mannesmanns, 



FRANCE AND THE MOROCCO INCIDENT 181 

and other concessionaires held a large and possibly 
a preponderating interest in the iron-mines, in the 
construction of public works, docks, and other en- 
terprises which were the result of governmental con- 
cessions. 

The interest of Great Britain was largely polit- 
ical. For strategic reasons the coasts of the Mediter- 
ranean and the Atlantic Ocean must not be per- 
mitted to fall into the hands of any hostile power. 
For the Mediterranean was a British sea, and the 
coasts bordering upon it or contiguous to it might 
be used as a base of operations and become a men- 
ace to British control of the route to India. This 
led Great Britain to favor an independent Mo- 
rocco. 

The Morocco Incident. 

In 1905 the powers were invited to a conference 
by the Sultan to be held in Algeciras in 1906. The 
purpose of the Conference was to establish the in- 
ternational position of Morocco and bring about 
needed reforms in her administration. As a result 
of this Convention the integrity and political inde- 
pendence of Morocco was assured by all of the 
great powers. This instrument formed the basis of 
the controversy over Morocco, the Panther incident, 
and the war scare of 1911 precipitated by the 
French invasion of Morocco territory. 

Soon after the agreement with England in 1903, 
when the British Government recognized French 



182 FRANCE AND THE MOROCCO INCIDENT 

claims as paramount in Morocco, France manifested 
a desire to establish an exclusive protectorate over 
that country. At the diplomatic congress of Alge- 
ciras France had pledged herself to respect the in- 
dependence of Morocco, and publicly renounced 
any intention of absorbing it. She agreed to ob- 
serve strict neutrality in all commercial matters, 
and the "open door" to all. At this congress 
France complied reluctantly with the demands of 
Germany, and was possibly not sincere. At any 
rate, she immediately began to exceed the police 
powers which had been conceded to her and Spain, 
in view of large Spanish interests in Morocco. 
France's police powers were for the purpose of help- 
ing the Sultan keep peace and maintain his own 
authority, and when France exceeded her powers 
she gave these needs as her excuse. England sup- 
ported France in her pretensions at every turn. 

The story of peaceful penetration into Morocco 
by France is, with slight modifications, the story of 
Egypt, Tunis, and Persia. It resulted, in five years, 
in the reduction of the Algeciras act for the pro- 
tection of the sovereignty of Morocco to a piece of 
waste paper. And the methods employed were the 
customary ones of high finance followed by political 
intervention. The young Sultan of Morocco had 
extravagant tastes. He plunged heavily into debt. 
He borrowed from French, Spanish, and British 
syndicates. One of the sights of Fez, the capital 



FRANCE AND THE MOROCCO INCIDENT 183 

city, a few years ago, was a great storeroom full of 
useless but expensive toys — water-boats, automo- 
biles, etc. — on which the Sultan had spent his sub- 
stance. In 1904 he paid off the old debts, amount- 
ing to about $4,000,000, by contracting a much 
heavier one in France alone of three times his 
previous liabilities. In this syndicate all the lead- 
ing French colonial banks enjoyed a share. Mo- 
rocco actually obtained less than $10,000,000, the 
banks making a profit of $2,500,000 on the trans- 
action, although Morocco was required to pay in- 
terest upon the full amount of the loan. To satisfy 
the creditors the Sultan set aside 60 per cent, of the 
customs receipts, and in effect gave France control 
over her custom-houses to that extent. Other sub- 
sequent loans were made, and a part of the money 
realized was used in buying guns and ammunition 
from the French munition makers. 

France was intrusted by the powers with the 
duty only of maintaining peace inside the country 
as a means of protection to foreign investments. 
Under the Algeciras act the political independence 
of Morocco had been guaranteed. In 1907 a 
Frenchman was murdered in one of the interior 
towns. France used this incident as a reason for 
invading the territory of Morocco, and of occupying 
the town of Udga just over the Algerian boundaries. 
Here she continued to remain, despite the frequent 
agreements to evacuate it. 



184 FRANCE AND THE MOROCCO INCIDENT 

"Political Penetration." 

Financial penetration was followed by concession 
seekers. A French-Spanish syndicate secured the 
right to build a railroad, one of the termini of which 
was near a large Moorish cemetery. The company 
insisted, despite the protests of the natives, on 
building their line through this cemetery. As a 
consequence there was a collision between the popu- 
lation and the European workmen, in the course of 
which several of the latter were killed. There was 
some disturbance inside and outside of the town 
of Casablanca. Thereupon the French bombarded 
Casablanca, in which bombardment thousands of 
Moors were slain. The soldiers overran the whole 
of the district beyond in the extension of their 
authority, in which process several engagements 
took place. This was the beginning of the end of 
the integrity of Morocco. 

The next step in the process of peaceful pene- 
tration was a financial one. France presented a 
claim upon the Moorish Government for $12,000,000 
expenses incurred by France herself in seizing Mo- 
roccan territory and in killing the Sultan's subjects. 
An additional bill was presented as compensation 
for the losses suffered by European and Moorish 
merchants through the bombardment of Casablanca. 
This, too, was forced on Morocco, and was subse- 
quently settled for $2,500,000. 

As a result of these occurrences and the internal 



FRANCE AND THE MOROCCO INCIDENT 185 

disturbance which followed the Sultan lost his 
throne and his brother was proclaimed at Fez in 
1908. Civil war followed and the country was in a 
ferment. 

New Financial Aggressions. 

The financiers made new demands. The Sultan 
was induced to contract another loan. A new con- 
solidated issue was made amounting to $20,000,000 
secured by Moorish revenues and including the 
entire customs receipts. The latter loan was an inter- 
national one in which France was the predominant 
partner. By the end of 1910 Morocco's indebted- 
ness to Europe had grown to $32,500,000. The 
net increase in seven years was $28,000,000. 

According to an American writer familiar with 
North African conditions "The French loan, as 
the commission to liquidate the national debt is 
called, has stripped the country of its last shreds 
of real independence." * 

Describing this loan Mr. E. D. Morel, an English 
writer, says: 2 

"This loan, like the previous one, was literally 
forced upon the Sultan. It was negotiated outside 
the Sultan altogether, insult being added to injury 
through the nomination by France as so-called 
guardian of Morocco's interests of ... a Coptic 
journalist ! Mulai-Hafid refused to ratify the agree- 
ment, and only yielded in the face of a French ulti- 

x Albert Edwards, Independent (N. Y.), March 23, 1911. 
% Ten Years of Secret Diplomacy, pp. 40, 41. 



186 FRANCE AND THE MOROCCO INCIDENT 

matum. The French interest in the loan was 40 
per cent., the German 20 per cent., the British 15 
per cent., the Spanish 15 per cent., the balance being 
distributed among other countries. The bonds of 
500 francs were issued to the public at 485 francs, 
and in Berlin and Madrid were many times over 
applied for. According to M. Jaures's unchallenged 
statement in the French chamber on March 24 last 
year, the participating French banks were allowed 
to take up the bonds at 435 francs, and in the after- 
noon of the day of issue the bonds went up to 507 
francs. The remaining 40 per cent, of the customs, 
certain harbor dues, and the tobacco monopoly 
were mortgaged as security for the bondholders — 
thus depriving the Moorish Government of all its 
resources save those which it might succeed in rais- 
ing by direct taxation. The loan itself the Sultan 
could not touch, for it was already earmarked to 
pay off Morocco's previous debts. 

"In order to carry on the machinery of govern- 
ment, indeed to keep up any form of native govern- 
ment at all, the unfortunate Sultan had no alterna- 
tive but to spend his remaining strength in wringing 
tribute by violence from the tribes. By this time 
he had become a helpless puppet in the hands of 
France, and the exactions and cruelties to which he 
was driven in order to make both ends meet resulted 
in the last vestige of his authority being flung off. 
His surrender to the European financial octopus was 
described by the Times Tangier correspondent as 
having ' humbled' his 'arrogance in the eyes of 
Europe and of his own people.' A few weeks later 
we find the same correspondent exclaiming that the 
'greater part of the country has been driven almost 
desperate by Mulai-Hafid's exactions.' But what 
else could have been expected? What else, it may 



FRANCE AND THE MOROCCO INCIDENT 187 

be added, was desired ? It was merely the operation 
of cause and effect. Europe had emptied his ex- 
chequer and prevented him from refilling it. He 
was faced with an ever-increasing anarchy and with 
the desertion of the troops he could no longer pay. 
And all the while, France pressed her 'reforms' and 
extended the area of her military occupation. The 
condition of Morocco became absolutely chaotic, 
and the Sultan, unable to fight, unable to rule, un- 
able to move, finally appealed to France. The 
French were only too ready to oblige ! 

"In April, 1910, General Moinier, at the head of 
30,000 troops, had marched upon Fez, meeting with 
little or no opposition, occupying Mequinez, and 
other places en route, and had finally entered the 
capital where he proceeded to settle down." 

The Financiers and the French Press. 

The French press, identified with the financiers, 
swept the government on to this occupation of the 
country. The story of how the occupation was 
brought to pass is related by a well-informed French 
publicist, M. Francis de Pressense, who described it 
as follows: 

"Nevertheless matters were still not sufficiently 
to the liking of the impressarii. To justify the fin- 
ancial operation which was to crown the sordid 
tragic-comedy, something else was still needed. And 
at this point the Comite du Maroc and its organs 
surpassed themselves. They organized a campaign 
of systematic untruth. Masters of almost the en- 
tire press, they swamped the public with false news. 
Fez was represented as threatened by siege or sack. 
A whole European colony was suddenly discovered 



188 FRANCE AND THE MOROCCO INCIDENT 

there living in anguish. The ultimate fate of the 
women and children was described in the most 
moving terms. Even in the absence of independent 
information one could not fail to be struck by the 
singular contradictions of these alarmist despatches. 
Now, Fez was lost because the Mehallah, com- 
manded by a French instructor, was away. Anon 
the return of the said Mehallah was calculated to 
lose Fez. One day, the alarmed public learned that 
the town had undergone a formidable assault. The 
next day the public was gravely told that the reb- 
els had not yet assembled, but in a few days would 
surround Fez with a circle of iron and flame. The 
most lamentable details were given of the state of 
the expeditionary Mehallah which only possessed an 
insignificant quantity of cartridges and shells, but 
this did not prevent the subsequent announcement 
that, thanks to the heroism of its leader, it had 
achieved a great victory and scattered the enemy 
with a hail-storm of shot and shell. Finally it was 
affirmed that in case of siege the city was only 
provisioned for two or three weeks. Thus carefully 
cooked, public opinion soon took fire. What was 
the government thinking of? At all cost the 
Europeans, the Sultan, Fez itself must be saved. 
... As ever, from the beginning of this enter- 
prise, the government knew nothing, willed nothing 
of itself. With a salutary dread of complications it 
would have preferred not to move, perhaps, even, 
had it dared, to withdraw from the hornet's nest. 
But the greater fears it experienced from another 
quarter prevailed; those inculcated by the so- 
called patriotic shoutings, the concerted clamors of 
the orchestra of which the Comite du Maroc holds 
the baton, and whose chief performers are to be 
found in Le Temps and Le Matin. The order to 



FRANCE AND THE MOROCCO INCIDENT 189 

advance was given. . . . Already while the expedi- 
tion was on its way, light began to pierce. Those 
redoubtable rebels who were threatening Fez had 
disappeared like the dew in the morning. Barely 
did a few ragged horsemen fire off a shot or two be- 
fore turning round and riding away at a furious gal- 
lop. A too disingenuous, or too truthful, corre- 
spondent gave the show away. The expeditionary 
force complains, he gravely records, of the absence 
of the enemy; the approaching harvest season is 
keeping all the healthy males in the fields ! Thus 
did the phantom so dexterously conjured by the 
Comite du Maroc for the benefit of its aims dis- 
appear in a night. . . . Avowals and disclosures 
then began in right earnest. One of the corre- 
spondents who had contributed his share to the 
concert of lying news, wrote with an admirable 
sang-froid that, in truth, there had been some ex- 
aggeration, that, in point of fact, at no moment had 
the safety of Fez and its inhabitants been seriously 
menaced; that the idea of a regular siege and of a 
sudden capture had been alike chimerical and that, 
moreover, so far as the provisioning of the place was 
concerned, he could reassure the most timorous 
that there was sufficient corn in the city to feed the 
whole population, plus the expeditionary column, for 
more than a year ! 

"The farce was played. After Casablanca, Fez. 
France, without realizing it, without wishing it, 
almost without knowing it, had taken a decisive 
step. An indefinite occupation of the capital was 
the natural prelude to a protectorate. For the 
clever men who had invented and executed the 
scenario there now remained only the task of reap- 
ing the fruit of their efforts. The era of conces- 
sions, profits, dividends was about to open. Pre- 



190 FRANCE AND THE MOROCCO INCIDENT 

mature joyfulness ! It was the era of difficulties 
which was at hand." 1 

The End of Moroccan Independence. 

The occupation of Fez was the end of Moroccan 
independence guaranteed by the powers. The ac- 
tion of France aroused Germany. The Panther was 
sent to Agadir. No landing was made, and no 
territory was occupied. Germany's representative 
did, however, intimate that she did not propose to 
permit the act of Algeciras to be set aside by France 
and Spain without discussion. And this act pro- 
vided for the integrity and political independence 
of Morocco. It upheld the open door and the pro- 
tection of German interests, which were very large. 
But an impasse had been created. Morocco had 
been occupied by nearly a hundred thousand French 
and Spanish troops. A French army of occupation 
was in the capital. The authority of the Sultan had 
gone. Morocco had ceased to be an independent 
state. For Germany to demand a return to the 
status quo would have humiliated France, and this 
was out of the question. As in the building of the 
Bagdad Railway, an act of aggression involving the 
" dignity " of the agressor nation having been com- 
mitted by one of the great powers, withdrawal was 
impossible. 
German Interests in Morocco. 

Germany had two reasons for attempting to keep 

1 Quoted by E. Morel, Ten Years of Secret Diplomacy, p. 107. 



FRANCE AND THE MOROCCO INCIDENT 191 

Morocco from French domination, the one directly 
a trade reason the other indirectly so. Germany 
desired new markets, and was loath to see any mar- 
ket shut to her goods, however poor the market 
might be. She had reason to believe that France 
would discriminate against her as soon as the " open- 
door" policy in Morocco was disregarded, for the 
French colonial policy has been exclusive in the ex- 
treme. France had undoubtedly planned to close 
Morocco to other nations, just as she has closed 
Algeria, Tunisia, and Indo-China, in spite of her 
promises of equal treatment. The soil of Morocco 
is fertile, and the purchasing power of the Moor is 
growing. The exports of the land, however, are 
not yet great, raw hides being still the chief article 
among them. But almost every metal is found there. 
Germany is especially interested in the valuable 
mineral deposits of the Sus province. 1 

The second and probably the most important 
reason for Germany's activity was her desire to pro- 

1 Frederic W. Wile, Berlin correspondent of the London Daily Mail, 
wrote to his paper in July, 1911: 

"The Mannesmanns' mining activities in Morocco are said to 
be inspired by the necessity of assuring the German steel and iron 
industry new sources of supply. There is alleged to be genuine 
concern over the diminishing supply in German mines. Great 
firms, like the Krupps of Essen and some of the 'uncrowned poten- 
tates' of Rhineland- Westphalia are associated with the Mannes- 
manns in the Moroccan venture and between them make up the 25 
per cent, of German interest in the Union des Mines Marocaines, 
which had so large a role in the Moorish troubles. The Krupps, 
etc., are also heavily interested in steel mills, iron-mines, and trans- 
portation projects affecting their industry in Scandinavia and Russia 
and even in Normandy." — (Fullerton, Problems of Power, p. 224.) 



192 FRANCE AND THE MOROCCO INCIDENT 

tect Islam from European domination. The Ger- 
man Emperor, as stated elsewhere, had declared 
himself the protector of Islam. A successful at- 
tack upon the Moorish Government would injure 
German prestige with the Mohammedans, among 
whom Germany hoped for the new markets she 
deems of such vital importance. Loss of influence 
at Constantinople might mean the wrecking of Ger- 
many's Bagdad Railway project. It was for this 
reason that Germany refused to join Christendom in 
protecting the Armenians from massacre. Yet she 
was unable to stop Italy from driving the Turks 
out of Tripoli. 

A Prelude to the Present War. 

There were endless conferences over concessions, 
privileges, and the readjustment of boundary-lines. 
The German concessionaires appealed to their gov- 
ernment for protection, and finally negotiations were 
opened on the part of France, England, and Germany 
for the settlement of the matter. England's rights 
in Morocco were far less important than those of 
either France or Germany. She was interested 
more in the protection of Gibraltar and her route 
to the Suez Canal than in financial investments. 
But Great Britain came to the aid of France, and 
in a speech in the City Mr. Lloyd George, with the 
approval of certain members of the cabinet, as- 
serted that Great Britain would support France in 
her claims. 



FRANCE AND THE MOROCCO INCIDENT 193 

Speaking of the Morocco incident J. Ramsay 
Macdonald, M. P., said: 1 

" 'It is all ancient history now/ it may be said. 
'We have our Egypt and France has her Morocco, 
and the end has justified the means.' But the fact 
is that the events and the policy exposed in this 
book (Morocco and Diplomacy) form an introduction 
to the present war. The Morocco affair slammed 
the doors in the faces of the peacemakers in Europe." 

Commenting on the same situation Mr. E. D. 
Morel said: 2 

"The Morocco problem itself and that of the 
Congo which (in another aspect than the one the 
public is familiar with) has now been grafted upon 
it, still contain numerous elements of international 
conflict — possibly of very grave conflicts. As a 
French writer of repute has put it: 'The arrange- 
ment of 1911 is either the prelude to a real under- 
standing between France and Germany, or it is the 
prelude of war.' " 

That war did not at that time (1911) result from 
the incident was due in part to the fact that the 
French bankers recalled their loans and upset the 
Berlin Exchange. The local trouble was smoothed 
over between France and Germany by the ex- 
change of some territory in Africa, but Germany 
was not satisfied, and bitter feelings still remained. 
By the settlement (1911) 100,000 square miles of 

1 Ten Years of Secret Diplomacy. (Introduction.) 2 Idem. 



194 FRANCE AND THE MOROCCO INCIDENT 

solid ground along the Congo and Ubangi Rivers, 
and a stretch on the western coast was given to 
Germany, while Germany in turn gave up a small 
piece of her territory in the northeastern part of 
Cameroon. The exchange netted Germany three 
new valuable trading-points and stimulated her 
ambition to connect by rail her territories on the 
eastern and western coasts of Africa. No consid- 
eration was shown the natives in the partition. 



CHAPTER XV 
THE PARTITION OF PERSIA 

"The strangling of Persia," as Mr. W. Morgan 
Sinister terms it, is the most recent, though per- 
haps not an altogether typical, instance of the 
gradual encroachment of commercial domination 
and spheres of influence in a weak, almost help- 
less country, into a protectorate, with foreign con- 
trol of the country's internal affairs. The popula- 
tion of Persia is less than 10,000,000, and the area 
610,000 square miles. In Persia the process of ab- 
sorption is not quite complete. Russia, "secretly 
bent on dominating the land, has been blocked to 
some extent by England, but England has not 
checked the aggressions of the Czar as the champion 
of Persian liberty. She has rather been a passive 
accomplice of Russia, anxious only that her own 
claims remain inviolate. 

The Russian Advance. 

For many years prior to the Anglo-Russian Con- 
vention of 1907 Russia had been interested in 
northern Persia, and this interest tended to ad- 
vance steadily southward. England viewed this 
advance with alarm, for she too had eyes on Persia. 

195 



196 THE PARTITION OF PERSIA 

She was especially concerned to see that the shores 
of the Persian Gulf in close proximity to India did 
not fall under the control of any European power, 
for the way to India must be kept free, and the 
Suez Canal must not be menaced. Russia also 
looked with longing eyes toward the Persian Gulf; 
and semi-official utterances stated that no division 
of the country should be made that jeopardized 
Russian claims to advancement to the sea. 

Nevertheless, English diplomacy succeeded in 
bringing about the Convention of 1907, under which 
instrument the British foreign office flattered itself 
that the Russian " march to the gulf" had been 
halted. Under the terms of the Convention Rus- 
sian interests, including banks, railroads, etc., were 
to be confined to the northern portion of the coun- 
try, and British interests to the southern, while be- 
tween the two there was to be established a sub- 
stantial neutral zone, in which both the signatory 
powers might seek concessions. This zone included 
the Persian Gulf ports. It was expressly stated in the 
Convention that Persian independence was to be safe- 
guarded. Political interests were not included in 
the spheres of influence. 

The Struggle for Self-Government. 

Meanwhile the Persians were struggling to estab- 
lish real self-government on the basis of the consti- 
tution forced from the Muzzafar-ed-din, the pred- 
ecessor of Mohammed Ah, in 1906. Mohammed 



THE PARTITION OF PERSIA 197 

Ali soon betrayed his opposition to popular gov- 
ernment and dissolved the Mejliss, or representative 
assembly, by force in June, 1908, probably with the 
support of Russia. The Nationalists rose in revolt 
against his authority at Tabriz, and held out until 
the following May, when a Russian force occupied 
the city, "to protect the lives of foreigners." Fin- 
ally in July, 1909, the Nationalist forces captured 
the capital, Teheran, and the Shah had to abdicate 
and flee to Europe. His young son, Ahmed 
Mirza, was proclaimed Shah in his place, with a 
regent at the head of the government. Again 
the Mejliss was called together, and efforts were 
made against great odds to restore the liberal con- 
stitutional government. The people were not 
trained to self-government, however. The cabinet, 
elected by the Mejliss, was often directly opposed 
to its wishes. Ministers changed portfolios among 
themselves, and then changed back again. Most 
of them soon came under the influence of the for- 
eign legations in Persia and represented the inter- 
ests of these or their own selfish interests. The 
Mejliss was ignorant of parliamentary procedure, 
it was broken up into political cliques, it never 
seemed to "get anywhere," and on occasion assumed 
executive powers. 

The treasury was bankrupt. Expenditure ex- 
ceeded the income. The Russian debt of 1900 
amounted to 22,500,000 rubles at 5 per cent., guar- 



198 THE PARTITION OF PERSIA 

anteed upon the customs receipts of the province 
of Fars and the Persian Gulf ports. Another loan 
of 1902 amounted to 10,000,000 rubles at 5 per cent. 
The British loan of 1911 was 1,250,000 pounds. 

Effort at Freedom from Foreign Control. 

Then the Mejliss decided to employ American 
experts to administer Persia's finances. From the 
beginning Russia was hostile to the move. The 
Russian Government sounded the State Depart- 
ment at Washington with a view to obtaining its 
refusal to the sending of American citizens to Persia 
to administer her finances. Finally, Mr. W. Morgan 
Shuster and a few assistants went to Persia. The 
State Department merely recommended Mr. Shuster 
and assumed no responsibility in any way in the 
matter. 

Mr. Shuster reached the country in May, 1911. 
Almost from the beginning he encountered Russian 
opposition. By a law of the Mejliss, June 13, 1911, 
defining the powers of the treasurer-general, Mr. 
Shuster was given charge of the collection of the 
revenue and supervision of the expenditure. Accord- 
ing to Mr. Shuster the Russian legation immediately 
declared war on the law, and announced that the Bel- 
gian customs employees should not be subject to the 
control of the treasurer-general. It even went so 
far as to threaten to seize the customs and put 
Russian officials in charge of the custom-houses, al- 
though the Belgian agents were complacent enough 



THE PARTITION OF PERSIA 199 

to Russian demands. M. Mornard, a Belgian, 
director of the customs service, announced he would 
not obey the law of the government that employed 
him (the Persian Government) nor recognize the 
American treasurer-general. Acting upon the Rus- 
sian initiative in these purely internal matters, the 
German, French, Italian, and Austrian legations 
entered all kinds of protests to the Persian foreign 
office. This all happened before any step took 
place that could possibly be called a breach of the 
interests of the foreign governments. 1 

Russian Intrigue. 

A second attack on Persian sovereignty, even 
more subversive than the first, was launched by 
Russia in the summer of 1911, this with the some- 
what reluctant participation of Great Britain. 
Again it was a matter concerning the administra- 
tion of the treasury. Mr. Shuster had been given 
permission to organize a treasury gendarmerie, 
which should act as the power behind the tax col- 
lectors, for in Persia taxes cannot be collected with- 
out a show of force. Large amounts of taxes never 
came in at all, and some of the rich Persian reaction- 
aries, encouraged by the Russian officials, refused to 
pay their assessments. After seeking far and wide 
for a man with the proper qualifications for training 
the gendarmerie, Shuster decided on Major Stokes 
of the Indian army, who knew Persian conditions 

1 W. Morgan Shuster, in Hearst's Magazine, April, 1912. 



200 THE PARTITION OF PERSIA 

thoroughly and could speak the language. The 
British Government notified the Persian foreign 
office that it could not agree to Stokes's appointment 
unless he resigned from the Indian army. Stokes 
acquiesced in this, and everything seemed settled. 
Then Russia objected to the appointment of Stokes 
as "inimical to her interests." Sir Edward Grey, 
desirous of not offending Russia, reversed his former 
position and said Stokes might accept the post only 
if he was to be employed in the English sphere of 
influence. He warned Persia that the employment 
of Stokes in the northern part of the country, in- 
cluding Teheran, would provoke "retaliatory action 
on the part of Russia, which England would not be 
in a position to deprecate." The truth was, the 
Novoe Vremya, a powerful organ of Russian imperi- 
alism, urged on by the Russian foreign office, had 
begun to bluster about the affair. Sir Edward Grey 
dared do nothing at the time which might weaken 
the entente. 

Now, the Persian Government had never recog- 
nized either of the spheres of influence mentioned in 
the Convention of 1907, and Russia would not de- 
clare what interests were menaced by the appoint- 
ment. The plain purpose of the Convention was 
that neither signatory power should ask for itself, or 
support in favor of its subjects, any concession of 
a political or commercial nature, such as concessions 
for railways, banks, telegraphs, roads, transport, 



THE PARTITION OF PERSIA 201 

insurance, etc., within the so-called sphere of in- 
fluence of the other. 1 This is a familiar agreement 
in the division of a weak nation. But Major Stokes 
was not a concession. England and Russia would 
not define what they meant by their rights and re- 
spective interests in Persia, but they evidently 
claimed the right to pass on any particular act of 
the Persian Government or any of its officials in 
the purely internal administration of the country, 
and to prevent that act by force, as events soon 
showed, if it did not suit them. Sir Edward Grey 
tried to explain his conduct with regard to Stokes 
on the ground that his appointment would have 
been a violation of the "spirit" of the Anglo-Rus- 
sian Convention. But why, asks Shuster most 
naturally, question its spirit when its words are so 
plain? The British Government accused Shuster 
of lack of finesse in dealing with diplomatic conven- 
tions, but Shuster answered that if there was any 
secret political significance in the "spheres," he 
should have been told of it; that he thought the 
powers were acting in good faith toward Persia and 
desired only that their commercial interests should 
be respected, and that he was acting on behalf of 
the Persian Government, which had steadfastly re- 
fused to recognize the spheres of influence. Indeed, 
what the Mejliss feared was the very suggestion 
made by Sir Edward Grey, namely that Stokes 

1 Shuster, The Strangling of Persia, p. 77. 



202 THE PARTITION OF PERSIA 

would be employed in the south only, thereby tac- 
itly confirming the division. 

The Convention of 1907 had solemnly guaranteed 
the independence and integrity of Persia, and no 
clause or word in it gave the powers the right to 
interfere in the internal affairs of the country. The 
Stokes incident showed that Russia at least had 
ulterior motives, which threatened Persian sover- 
eignty in its most elemental functions; that with her 
the letter of the treaty counted for nothing, and that 
she claimed and exercised the right to interfere in 
purely domestic concerns. Great Britain yielded 
the point. Russia's compromise offer, to accept a 
Swedish officer in place of Major Stokes, was of no 
practical use, for the post required a man of Stokes's 
qualifications only. 

Internal Revolution. 

Another blow against constitutional government 
in Persia was the escape of the ex-Shah Mohammed 
Ah, in the fall of 1911, from Odessa, where he was 
supposed to be interned. He entered Persia with 
a considerable army, plotted with the Turcomans 
for the recapture of his throne, and raised to his 
standards great numbers of reactionaries and ma- 
rauders of all types. The Nationalist forces, so far 
as regular troops were concerned, were almost non- 
existent. Such armies as the government was able 
to raise consisted largely of semi-nomadic tribes- 
men and self-seekers. The revolt threatened Per- 



THE PARTITION OF PERSIA 203 

sia's independence and strained her finances to the 
breaking-point. The Russian Government, acting 
for itself and Great Britain, had in 1909 assumed the 
responsibility of keeping the ex-Shah to his agree- 
ment not to engage in any political agitation against 
the constitutional government of Persia. But in- 
stead of helping the government of Persia to the 
extent at least of warding off rebellion under Mo- 
hammed Ali, it is believed the Russian Government 
actually aided him in his invasion. At least Russia 
was very lax in carrying out her trust. It is im- 
probable that Russia did not aid him in escaping, 
and it is quite certain that that government would 
have been glad to see him reoccupy the throne, for 
a tyrant like Mohammed was recognized by Russia 
as the best means of advancing her aggressive pol- 
icy in Persia. A constitutional government, however 
young and weak, would be far less tractable than a 
single despot on a throne. 1 

For some time before his departure from Europe 
Mohammed Ali was known to be buying arms in 
Vienna. He sailed away in a Russian boat, his 
face disguised only by a beard, his rifles in cases 
marked "mineral water." The Russian consuls in 
Persia openly rejoiced at any successes of Mo- 
hammed's generals. England and Russia in similar 
notes recognized the ex-Shah's belligerency. Sinis- 
ter reports that the Russian minister asked him 

1 Shuster, supra, p. 109. 



204 THE PARTITION OF PERSIA 

after dinner one evening if he would not keep his 
post under Mohammed Ali and simply remain 
passive till the change took place. Finally, how- 
ever, the ex-Shah was defeated and fled to Europe, 
in March, 1912. 

Stirring up Civil War. 

But Russia did not permit the failure of the ex- 
Shah's cause to interfere with her ambitions. For 
months she had been seeking to provoke a Persian 
attack upon Russian officials. The opportunity 
came when the Persians confiscated the estates of 
one of the leading rebels. The Persian soldiers, 
taunted in carrying out their work by a few Russian 
consular officials, managed to control themselves. 
But the Russians had come to provoke a quarrel 
and furnish an excuse for calling on their troops; 
and when the occasion was not given they in- 
vented the story of an attack. An ultimatum was 
sent to Persia demanding an apology and a return 
of the estates. The British Government advised 
the Persians to yield, which they finally did. But 
Russia did not want compliance with her wishes 
but rather a pretext for sending troops. The Per- 
sian officials were notified that a second ultimatum 
was already on the way. This ultimatum, of Novem- 
ber 29, 1911, demanded that the Persian Govern- 
ment dismiss Shuster and his assistants and that 
it no longer engage foreign subjects in the service 
of Persia without first obtaining the consent of the 



THE PARTITION OF PERSIA 205 

Russian and British legations. The payment of an 
indemnity by the Persian Government for the ex- 
penses of the Russian troops sent to Persia to back 
the ultimatum was also demanded. 

Great Britain's name was freely used in the ul- 
timatum, although only the Russian minister pre- 
sented it. Some slight pretext, of course, was 
found for Russia's objection to Shuster, but it was 
entirely unfounded. Toward the end of 1911 and 
early in 1912 thousands of Russian troops were 
stationed throughout the province of Azerbaijen 
and in northeastern Khorassan, although Russia 
insisted this meant no threat to Persian indepen- 
dence, and said the troops would be withdrawn as 
soon as order was restored. 

"By an act of rare heroism," as Shuster calls it, 
the Mejliss voted resistance to the second ultima- 
tum, but the cabinet gave way. Finally came the 
coup d'etat of December 24, 1911, when the Mejliss 
was dissolved by the regent. 

Russia's sway was now all but complete. Shuster 
thereupon left Persia. On his return to America 
he announced that, as a consequence of European 
meddling, Persia was in a state of anarchy. The 
power was in the hands of seven Persian officials, 
who were without character and honesty and were 
despised by the people. Their continuance was 
wholly due to the support of the British and Rus- 
sian Governments. Shuster explained that Russia 



206 THE PARTITION OF PERSIA 

was able to carry through her aggressive policy in 
Persia by reason of the Moroccan crisis in Europe, 
which left Russia free to work out her will in the 
East without pressure from England or Germany, 
which were otherwise occupied. The Potsdam 
agreement between Germany and Russia in 1911 
also strengthened Russia's hands, one of the articles 
in that agreement being that German capital would 
assist in the construction of a railway from Teheran 
to Khanikin on the Turco-Persian frontier. This 
line, financed partly by Germany and partly by 
Russia, was to be under the control of the Russian 
concessionaires. 1 There may have been secret 
clauses in the agreement giving Russia still further 
powers in return for her good-will in the German 
Bagdad Railway project. 

English Defense of Her Policy in Persia. 

England's conduct throughout the entire affair 
aroused much criticism both at home and abroad. 
Lovat Fraser writes a defense of British proce- 
dure in Persia in the Edinburgh Review, of October, 
1912. But even if the Persians were as unfit for 
self-government as he asserts, and even if England 
and Russia had the good intentions toward Persia 
with which he credits them, the fact remains that 
these powers took advantage of Persia's weakness 
for their own commercial and political advantage 
and that to-day the country is a protectorate in 

1 Shuster, supra, p. 254. 



THE PARTITION OF PERSIA 207 

all but name. Fraser's conclusion that the Persians 
are unfit for self-government is based on the facts 
that they are an imaginative, deliberative people, 
good at parliamentary debates, but lacking in the 
ability to decide on a definite course of action. The 
cabinet was usually opposed to the Mejliss. The 
ministers were unpatriotic and sought to further 
their own interests or those of the foreign legations 
under whose power they had fallen. Many of the 
members of the Mejliss were selfish schemers, and 
others were in the control of political cliques. In 
defense of Russia Mr. Fraser denies that there was 
any "open intervention" on her part in favor of 
Mohammed Ali at the dissolution of the first Mejliss, 
as Shuster asserts. He interprets the taking of 
Tabriz by the Russian troops during the Nationalist 
uprising as an advantage to the Nationalist cause, 
for their soldiers were in dire straits at the time. 
He also questions other accusations of Shuster 
against Russia. The Nationalist forces were to him 
little more than robbers, and he refuses to see any 
patriotic motive in their struggle. Shuster had no 
right to complain of the coup d'etat of December 
24, 1911, when the Mejliss made an attempt to resist 
the Russian ultimatum, for the Mejliss had been in 
session at least a month beyond the legal term of two 
years. Fraser admits that Russia had massed troops 
at various points in the north of Persia, and Great 
Britain a much smaller force in the south, but claims 



208 THE PARTITION OF PERSIA 

that these were necessary to preserve Persia from 
herself. British interests, besides trade, loans, and 
treaties, demanded that the Persian Gulf remain 
inviolate. 

British Political Interests. 

This is the British Monroe Doctrine of the Mid- 
dle East. Were Persia allowed to remain in a state 
of anarchy her shores would be invaded by foreign 
powers. The route to the East, Egypt, and the 
Suez Canal would be in danger. Russia, too, could 
not remain passive while Persia was in anarchy, 
because Russia governs subject races just to the 
north of Persia. Great Britain, he avows, has no 
desire for conquest in Persia, but he cannot say the 
same for Russia, although that country "has re- 
peatedly exercised the greatest restraint in Persia 
and has been faithful to her pledges to Great Brit- 
ain." Both powers for years pursued "as far as 
possible a policy of non-intervention in Persian in- 
ternal affairs." Russia never sent troops to Persia 
without good reason, although sometimes in ex- 
cessive numbers, and when she finally developed 
hostility to the Nationalists she did so under extreme 
provocation. As for Russian and English relations 
in Persia, Mr. Fraser says: "It would be foolish 
not to recognize that the pressure of Russia upon 
northern Persia is like the pressure of the ocean 
upon a weak and crumbling dike. The breach 
will be made some day, and the tide will roll south- 



THE PARTITION OF PERSIA 209 

ward." But Russia and Great Britain will, he 
thinks, make real attempts to set up a stronger 
government in Persia. "Direct backing by officials 
representing Great Britain and Russia will prob- 
ably be deemed a necessity." And this necessity 
brings into view the second consideration. There 
must be some geographical line of division within 
which the support given to the Persian adminis- 
trators by English and Russian officials can be 
respectively exercised. Russian support would nat- 
urally be chiefly exercised at Teheran, while British 
influence would find its most appropriate scope at 
Shiraz. 

"The third principle is that the spheres of in- 
fluence marked out in the Anglo-Russian Con- 
vention can no longer be rigidly observed. If Great 
Britain is to help a Persian administration to gain 
stability, her good offices must chiefly be tendered 
in the sphere hitherto regarded as neutral. 

"The fourth principle is that substantial financial 
help must be given if Persia is to rebuild her ruined 
administrative system." * 

From all this it is clear that the influence of the 
powers in Persia will not diminish in the near fu- 
ture. 

The Conflict of Overseas Imperialism and Morals. 

In defending Great Britain's course, Mr. Fraser 
claims that if his government did not remain in 

1 Edinburgh Review, October, 1912. 



210 THE PARTITION OF PERSIA 

Persia, Russia would interpret the move as an in- 
vitation to herself to proceed to the shores of the 
gulf. The entente might then be broken and the 
approaches to India would no longer be safe. More- 
over, Great Britain cannot be expected to resist Rus- 
sia with force in Persia. Only Russia's forbearance 
keeps her within the northern sphere, for England 
could not concentrate a force against her there. 

Sir Edward Grey's explanation of the position of 
the foreign office in Persia bears out several of these 
points. He said that British intervention (against 
Russia in Persia) must be based on British interests; 
that the British Government could not act as arbiter 
when disputes arose between other countries (Per- 
sia and Russia) ; that he did not wish to come to a 
more definite agreement with Russia for the pur- 
pose of resisting her encroachments, because "then 
indeed we should come nearer to the partition of 
the country." x 

Gains from the Protectorate to the Financiers. 

Early in 1912 the two powers sent a joint note 
to Persia, saying Russia would require the ex-Shah 
to leave Persia, provided Persia would grant him a 
pension and would grant amnesty to his followers. 
Great Britain and Russia would then agree to make 
Persia a loan of 100,000 pounds each for immediate 
expenses, which money was to be disbursed under 
the supervision of the treasurer-general, with the 

1 International Year Book, 1912. " Persia." 



THE PARTITION OF PERSIA 211 

approval of the British and Russian legations. In 
return Persia was to conform to the Anglo-Russian 
Convention of 1907, recognize the rights of Great 
Britain and Russia in their respective spheres, re- 
organize her army to suit these powers, and dismiss 
the irregular troops from it. It was stated that the 
British loan was to be applied to the restoration of 
order on the southern trade routes. Persia accepted 
the loan on the conditions offered in March, 1912. 
Another joint loan was announced September 4, 1912. 
The first elections to the Mejliss since December, 
1911, were held in the autumn of 1913. The new 
ministry, formed in January, 1913, showed from the 
first that it was not disposed to resent foreign in- 
fluence. In order to obtain financial assistance the 
government made important concessions to Russian 
and British interests. In February, 1913, the Per- 
sian Discount Bank (Russian) was authorized to 
construct a railway from Julfa to Tabriz, with a 
branch to Urmia, and to exploit mineral resources 
within a forty-mile zone on either side of the rail- 
way. Simultaneously it was announced that a 
British syndicate would construct a railway from 
Mohamerah, at the head of the Persian Gulf, to 
Khoremmabad. These announcements were imme- 
diately followed by the decision of the British and 
Russian Governments jointly to advance $2,000,000 
to Persia, in addition to the special British advance 
of $500,000 for the gendarmeries at Fars. The Brit- 



212 THE PARTITION OF PERSIA 

ish Government, to show its good-will, announced 
the withdrawal of its troops at Shiraz. But Russia 
remained in virtual possession of the northern prov- 
inces, with garrisons aggregating 17,500 men. The 
collection and expenditure of all revenue is under 
the supervision of a European treasurer-general. 

The Persian question is rather more confused than 
other examples of overseas aggression. There are 
plausible grounds for English fears that Persia might 
fall under the control of a hostile power; that such 
a contingency would imperil her interests in Egypt 
and her free and unimpeded control of the water 
route to India and Australia, and that if she did not 
participate in the protectorate of Persia Russia 
would push her control to the Persian Gulf, and 
thus menace Great Britain at the Suez Canal on 
one side and India on the other. 

To prevent this England joined in the partition 
of Persia. Her justification, if justification there 
can be, is that Russia would strangle Persia alone, 
and that was a greater calamity to the country than 
a joint participation in the process. And as a corol- 
lary to political intervention and an aid to inter- 
ference the financier was invited in. Loans were 
made to Persia which justified participation in her 
internal affairs for the protection of the investor, 
which participation gave a legal sanction to the 
depredations and offered an entering wedge for fur- 
ther political aggression. In addition concessions 



THE PARTITION OF PERSIA 213 

were granted for railroads, which had a strategical 
value and still further cemented Russian and Brit- 
ish influence in their respective spheres. 

The division of Persia practically closed the chap- 
ter of European aggression in the Mediterranean 
outside of Turkey and the Balkans. It began with 
the purchase of the Suez Canal shares by Disraeli 
in 1875, and the occupation of Egypt in 1882. The 
partition gave England all of the strategic points 
save Constantinople, including southern Persia, 
Egypt, and Gibraltar. France, England's ally, holds 
Algeria, Morocco, and Tunis, while Italy has Tripoli. 
The present war will settle the fate of the Balkans, 
and may leave the great powers facing one another 
for a subsequent conflict to determine the control 
of the Mediterranean, which two thousand years 
ago was the centre of the then European world. 



CHAPTER XVI 

GERMANY AND THE BAGDAD RAILWAY 

The Bagdad Railway incident figures more promi- 
nently in the present European war than is generally 
admitted. None of the great powers have ever 
made public the ulterior significance of the many 
moves in an international game of chess that has 
been going on for nearly twenty years. Probably 
they dare not. If all of the facts were known, it 
would discredit diplomatic honesty. It would also 
reflect on the patriotism of great financial houses 
that participated in the scheme, even against the 
interests of their own country and the policy of 
their governments. Least of all can Germany aver 
that the diplomatic activities of England, France, 
and Russia were a casus belli, for the ulterior plans 
of Germany were doubtless far different from her 
friendly assurances to the Porte, whose protector 
Germany undertook to become. For Germany had 
dreams of a greater empire, an empire comparable 
to that of Great Britain, an empire that would ulti- 
mately extend from the North Sea to the Persian 
Gulf. The first step to this empire was the Bagdad 
Railway. 

214 



GERMANY AND THE BAGDAD RAILWAY 215 

Dreams of Empire. 

For twenty years the Bagdad Railway has been the 
most splendid of all dreams of the German financier, 
of the German trader, and of the German militarist. 
It was a dream of really imperial proportions. This 
was the dream: beyond Austria, separated only 
by Roumania, Bulgaria, and Servia, was Turkey, 
with a population of 24,800,000. On the other side 
of the Bosporus was the hinterland of the Ottoman 
Empire, extending to the Persian Gulf, whose disin- 
tegration was only a matter of years. Here were 
millions of hard-working, industrious people, but lit- 
tle given to industry, who offered a market for Ger- 
man wares. Here were harbors and seaports, railroad 
and banking concessions, and mineral resources, all 
relatively easy of defense. But far and away most 
important of all, here was a wedge that would split 
the British Empire asunder. Here the work of cen- 
turies could be undone, and the British Empire be 
broken into helpless and dependent parts, an easy 
prey to ambitious German arms. Here were Egypt, 
southern Persia, and the Suez Canal, all under 
British control, within quick railway striking distance 
of Germany and Austria which, once occupied, would 
permanently end England's control of Oriental trade 
and afford quick and controlling access to India, 
Australia, the east coast of Africa, Hong-Kong, and 
the richest of British colonial possessions. 

With Germany ascendant in Turkey, France 



216 GERMANY AND THE BAGDAD RAILWAY 

would be cut off from Russia. Russia's centuries- 
long ambition for the Bosporus and an outlet to 
the Mediterranean, with all-the-year-round seaports, 
would be permanently ended. Here was control of 
the Balkan states, unquestioned influence in Bul- 
garia, Roumania, and Servia, and a standing men- 
ace to Greece. Austria would be secure to pursue 
her ambitions in Macedonia, while the whole hinter- 
land, running from Constantinople to the Persian 
Gulf, would be open to German control. 

Here was the opportunity for an empire like that 
of Rome, extending from the North Sea and the 
Baltic to the Indian Ocean; an empire under easy 
control, relatively easily defended and rich in oppor- 
tunities for exploitation. Turkey and her dependen- 
cies furnished the richest prize in the whole long 
history of colonial expansion. It was a dream like 
that of Alexander or Napoleon. And the dream was 
to be realized through the building of a great rail- 
road system from Constantinople to the Persian 
Gulf; or, as the German imperialist saw it, from 
Hamburg to the Persian Gulf and on to India. 
Examine the map of Europe and Asia and see what 
it involved. It was worth any price to Germany 
to secure this prize. And in order to realize it, 
Christian Germany became the ally and protector 
of the Turk in Europe. 

But the dream was balked by Great Britain. 
She prevented the completion of the railway and 



GERMANY AND THE BAGDAD RAILWAY 217 

erected another Gibraltar in the path of German 
advance, a Gibraltar that stood impregnable be- 
cause of the British navy and British control of the 
Mediterranean. 

And German imperialists, German financiers, Ger- 
man traders cannot forget. Lesser failures might 
be compensated for. The check to control of the 
Ottoman Empire, with all of its historical tradi- 
tions and glories, cannot be easily forgiven. This 
as much as anything else explains the "hate" of 
England. This, with the Morocco incident, is 
largely responsible for the present European war. 

The Beginning of German Influence in Turkey. 

German capital had been invested in Turkey and 
the Near East for many years, particularly in the 
railroads built by Baron Hirsch in European Turkey, 
1874-88, and lines in Anatolia built with the aid 
of German banks. German export companies in 
Turkey induced the capitalists to take greater no- 
tice of this field, and the railway concessionaires 
spent great sums for publicity. Baron Hirsch spent 
101,800,000 francs for the advertisement of his 
Turkish lotteries. The two trips of the Kaiser to 
Turkey, in 1888 and 1898 respectively, were partly 
the result of the awakened interest of capital in 
Turkey, and partly the result of a dream of real 
dominion and a greater empire. The result of the 
second visit was the granting of the Bagdad Rail- 
way concession to a group of capitalists rallying 



218 GERMANY AND THE BAGDAD RAILWAY 

around the Deutsche Bank. The Bagdad Railway 
was the means of "peaceful penetration" into the 
politics and ultimate control of the foreign policy of 
the empire. 

Railway building in Turkey had begun as early 
as 1888, the year of the Kaiser's first visit, when 
the first German company obtained the right to 
exploit the Haidar-Pasha-Ismidt Railway in Asia 
Minor, as well as concessions for 99 years for a 
railway from Ismidt to Angora. Thus the Anatolian 
Railway Company, with the Deutsche Bank as its 
backer, entered on the scene. 1 

Haidar-Pasha is on the Asiatic side of the Bos- 
porus, and was the starting-point in Turkey for 
the great Bagdad arterial system from Constan- 
tinople to the Persian Gulf, and the creation of a 
through transportation system from the North Sea 
on to the Persian Gulf and India — a route over 
which the German merchant dreamed he would 
one day send his goods more cheaply and quickly 
than via the Suez Canal. The initial concession was 
followed by others. In 1893 a grant was secured 
for the extension of the road to Konia, and by 1896 
the first 535 kilometres of the railway had been 
built. 

The Entrance of Statecraft into Finance. 

Finance having obtained a foothold, the bonds 
had to be cemented by statecraft and diplomacy. 

1 A. Geraud, Nineteenth Century, May, 1914. 



GERMANY AND THE BAGDAD RAILWAY 219 

In 1898 the Kaiser paid a second visit to Con- 
stantinople. Now began the realization of the 
"Drang nach Osten"; the dream of an Eastern 
Empire not only for commerce but for political 
domination as well. This dream has steadily oc- 
cupied the mind of German diplomacy and German 
finance; it has involved endless negotiations and 
friction with other nations profoundly interested 
in this portion of Europe; a friction which has 
been complicated by the fact that the financiers of 
hostile nations were lured to co-operate with Ger- 
many by the colossal profits which the project 
promised. For England saw that the great railway 
would not only dump German goods into India 
cheaper than by way of the Suez Canal; it might 
also dump soldiers in spiked helmets into the most 
vulnerable parts of Britain's empire. 

And all Europe was awake to the situation. The 
Cretan insurrection of 1897-8 was undoubtedly 
fanned by the European powers. It played a part 
in the game of intrigue. Each wanted a predomi- 
nant interest in Crete, an island of great strategic 
value and possessing a fine harbor, large enough to 
hold 100 dreadnaughts. The pretext of the powers 
in intervening was their desire to rescue the island 
from Ottoman tyranny. Germany alone held aloof. 
The dream of the Kaiser was of far more importance 
than a share in the control of Crete. It involved 
the friendship of the Porte. Shut out of other sec- 



220 GERMANY AND THE BAGDAD RAILWAY 

tions of the globe, Asia Minor remained. It was 
the back door of the German Empire. Here was a 
sphere of influence worthy of some sacrifice. During 
the visit of William II to Constantinople in 1898 he 
proclaimed himself the eternal friend of the Caliph. 
For abstaining from meddling in Crete and for 
using his influence with the other powers to induce 
them to keep hands off, he received his reward in 
the shape of further concessions in Turkey in Asia. 
He was promised the concession for a railway 
from Konia to the Persian Gulf. The route of 
the proposed railway ran through the heart of 
Anatolia, over the Taurus Mountains to Adana, 
through southern Kurdistan, to Nineveh, and on to 
Bagdad. Thence the line was to continue south- 
ward via Babylon, Kerbela, and Basra to the ter- 
minus at the harbor of Koweit on the Persian Gulf. 
Koweit was the coveted prize. It was the outlet 
to the Far East. 1 The formal conventions with the 
Turkish Government were signed a few years later, 
in 1902 and 1903, and as the building of the road 
progressed new conventions were drawn up for 
financing the various sections and the revision of old 
grants. 

Other Concessions. 

Concessions for branch lines were also granted 
to Aleppo and Orfa, and from Bagdad to Khanikin 
on the Persian frontier, as well as other lines con- 

1 E. Alexander Powell, Everybody's Magazine, July, 1909. 



GERMANY AND THE BAGDAD RAILWAY 221 

necting the principal railway with the Mediter- 
ranean. Ottoman mileage guarantees amounting 
to about $5,000,000 per year were secured from 
Turkey. Other valuable concessions, given in 
perpetuity, were a tract of land 12.4 miles wide, ly- 
ing on both sides of the road-bed (6.2 on each side) 
for a distance of 1,500 miles or 18,600 square miles 
in all, with the exclusive right to cultivate it, work 
the mines, etc., using all waters along the route for 
electric purposes. The right was also granted to 
build quays at Bagdad, Basra, and on the Persian 
Gulf. Mesopotamia, through which the road ex- 
tends, has bituminous coal and petroleum fields of 
great value. This country, together with Anatolia 
and Syria, can produce as much wheat as Russia, 
while western Asia Minor can be made to produce 
vast supplies of cotton. The land is now barren 
only because of neglect. These are the supplies 
which Germany needs to be independent of other 
countries. 

In November, 1907, the Anatolian Railway 
Company, a German corporation, entered into an 
agreement with the Turkish Government by which 
the company was to irrigate about 132,500 acres in 
the plain of Konia, in the centre of Asia Minor. 
The funds, amounting to about $4,000,000, were 
to be advanced by the company, which undertook 
to carry out the work in five years. Under the 
conventions of 1911, the company was permitted 



222 GERMANY AND THE BAGDAD RAILWAY 

to dig harbors and build quays at Bagdad, Alex- 
andretta, and Bassora, and to establish a steam- 
ship service on the Tigris and Euphrates, and to 
carry on as much timber enterprise as it wished in 
the "neighboring forests." It was also given the 
right to provide stores and warehouses for its em- 
ployees and for the public, with the proviso that 
25 per cent, of the profits were to go to the Turkish 
Government. This company also secured the mo- 
nopoly of the brick works in the regions traversed 
by its line. 

Political Penetration. 

Nothing is definitely stated in the conventions 
about colonization. It is true that in 1903 the 
directors of the company in a letter to the ministry 
of public works pledged themselves not to bring 
or plant foreign colonies in the neighborhood of 
the line. 1 Professor Delbriick also disclaimed any 
intention on the part of Germany to establish 
colonies in Turkey. "Those Germans who seek 
occupation outside the Fatherland," said Del- 
briick, "are all but exclusively members of the 
energetic upper classes and representatives of cap- 
ital. . . . They are too few to become perilous to 
a foreign nationality." 2 

Official Germany asserted that it was interested 
in Asia Minor only as it offered new fields for trade 

1 A. Geraud, Nineteenth Century, May, 1914. 

*H. F. B. Lynch, Fortnightly Review, March 1, 1911. 



GERMANY AND THE BAGDAD RAILWAY 223 

and investment, and that English and French 
capital had been invited to co-operate in building 
the Bagdad Railway. Since this was not forth- 
coming (for reasons that will be shown later) Baron 
von Schoen stated in the Reichstag, March, 1908 1 1 

"We trust and believe that, in accordance with 
the predominant part which Germans have taken 
in initiating and financing the scheme, German in- 
fluence will remain predominant in the enterprise. 
But all assertions which have been advanced with 
regard to German political schemes in connection 
with the railway or with reference to an alleged 
plan of German colonization in the districts through 
which it passes are pure inventions." 

On the other hand, Von der Goltz Pasha stated 
that to the end of his reign Abdul Hamid was in 
favor of German colonization in Asia Minor. It is 
also known that the Kaiser sent an agent to the 
United States to investigate methods of coloniza- 
tion. 

The Menace to Europe of German Control of the Bag- 
dad Railway. 

England, Russia, and France were greatly dis- 
turbed by the German project and the encroach- 
ments of German power in Asia Minor. Lord 
Fitzmaurice predicted in the House of Commons 
April 8, 1903: 

"Bound up with the future of this railway there 
is probably the future political control of large 

1 Dawson, Evolution of Modern Germany, p. 346. 



224 GERMANY AND THE BAGDAD RAILWAY 

regions in Asia Minor, Mesopotamia, and the Per- 
sian Gulf." He declared further that the Bagdad 
Railway in German hands marked the end of Tur- 
key's subjection to the nations of Europe. An- 
other English leader, Mr. Gibson Bowles, declared 
in 1903 that the Bagdad Railway "was a political 
conspiracy directed against us." 1 

Pointing out the political consequences of Ger- 
many's predominant interest in the railway, H. F. 
B. Lynch writes : 2 

" The truth is that an enterprise of the proportion 
of the Bagdad Railway, with the numerous exten- 
sions provided for in the original concession, and 
with the rights granted to the company on either 
side of the line, must almost certainly, if undertaken 
by the subjects of a single power, lead up to a pro- 
tectorate. . . . Even if Germany were prepared 
for such a consummation it would be interesting to 
know whether her statesmen have fully considered 
its inevitable sequel and result. Russia would feel 
constrained to occupy Persia, and the Persian mar- 
kets would be closed to German commerce." 

Speaking of German influence in Constantinople, 
the same writer says a reliable report from that city 
describes it as follows, in 1905: "The Grand Vizier 
is regarded here as a dragoman of the German em- 
bassy. Whenever the Grand Vizier is in difficul- 
ties he goes to the ambassador for advice." 

X A. Geraud, "New German Empire," Nineteenth Century, May, 
1914. 
2 Fortnightly Review, May 1, 1911. 



GERMANY AND THE BAGDAD RAILWAY 225 

The Menace to Egypt and British Ambitions. 

Under the conventions of 1911, the German com- 
pany secured from the Porte the exclusive monopoly 
over two new arteries, namely the branch line to 
Alexandretta on the Mediterranean coast and an- 
other branch, leaving the main line at Killis to 
connect at Aleppo with the Damascus Railroad. 
This branch in particular caused concern among the 
English statesmen because they believed it was aimed 
at Egypt. The Germans made no secret of the 
political importance they attached to the road. Pro- 
fessor Rohrbach says frankly: "Egypt is the most 
vulnerable point in the British Empire." 

In addition to the menace to the empire, the 
completion of the Bagdad Railway and the ascen- 
dancy of Germany in Asia Minor threatened other 
plans of the English imperialist and financier. One 
was a project to connect Egypt with Persia through 
southern Arabia. The other was to colonize south- 
ern Mesopotamia with Egyptian peasants, prepara- 
tory to its annexation. 

Only less important to the British trading classes 
was the opening of a competing rail route to the 
Orient, a route that was quicker than the Mediter- 
ranean and the Suez Canal and that placed the 
manufacturers of Germany and Europe on a plane 
of equality, if not supremacy, with those of Great 
Britain. The merchant marine of England was 
threatened as well as her supremacy of the trade of 



226 GERMANY AND THE BAGDAD RAILWAY 

the East. The Bagdad Railway was a menace to 
the economic as well as the political life of the 
British Empire. It was a menace to all classes. 

Russia, too, was irritated by the German advance 
into Asia Minor. As compensation she exacted 
from the Turkish Government the promise that all 
railroads around the Black Sea should be built only 
by Russians or by the Turks themselves. Russia 
also persuaded France to bar the Bagdad Railway 
quotations from the bourse, a step which would in- 
directly boost the Russian borrowing power in 
France and at the same time seriously cripple the 
financing of the Bagdad Railway. For Germany 
had to rely on foreign capital in carrying forward 
the project. Germany needed her surplus capital 
at home for the development of domestic industry. 
For this reason she was compelled against her will 
to go to France and England for aid. 

France, too, was inimical to the project. Her 
trade with Turkey was small and had grown but 
1,000,000 marks from 1901 to 1905, although she had 
invested during that time 2,000,000,000 marks in 
Turkey, as against 300,000,000 to 500,000,000 marks 
of German capital. And the French Government 
protested against French capital being invested in 
the railway. Despite official opposition, however, im- 
mense sums were invested by the French bankers 
in the railway, and in 1912 from 30 to 40 per cent, 
of the interest in it was held in France. The banks 



GERMANY AND THE BAGDAD RAILWAY 227 

were unable to resist the temptation. Prospective 
profits were stronger than patriotism. 

Abdul Hamid, the Sultan of Turkey, favored the 
railway because it would strengthen his authority 
over the lands in Mesopotamia and Babylonia, 
which were now given over to robbers and bandits. 
He could not, however, build the railway himself 
because of financial difficulties, and for this reason 
passed it into the hands of German capitalists, sub- 
jects of the nation most interested in postponing the 
disintegration of Turkey, and willing to become a 
protector of the Ottoman in Europe. 

Opposition of the Powers. 

The hostility of the other nations retarded the 
construction of the railway. In 1906 the powers 
refused to give their consent to the increase of the 
Turkish tariff, unless the increased revenue were 
used for reforms in Macedonia. By this refusal the 
hostile powers thought they would thwart the proj- 
ect, as the German financiers either would not, or 
could not, proceed with the railway without the 
Turkish mileage guarantee. At the same time by 
this arrangement the other powers were able to 
pose as the friends of the Balkan peoples. 

Germany had to acquiesce in this veto of the 
powers, although in the provision just made with 
the Porte it had been definitely assured that the 
increases of the tariff would go to the credit of the 
railway. The German Government and the German 



228 GERMANY AND THE BAGDAD RAILWAY 

financiers were complacent because they were un- 
willing to put any additional difficulties in the way 
of Turkey with regard to the railroad, and because 
they were assured that Turkey would be able to 
raise the money for the guarantees by other means. 
Through the unification of a previous series of loans 
Turkey made some economies, which she turned 
over to the Bagdad Railway, even against the wishes 
of the powers. Nevertheless, the bickerings over 
the increase in the tariff and the guarantees held up 
the Bagdad project for several years. 

International Trading at the Expense of Turkey. 

The Young Turk party, which leaned toward 
England, came into power soon after. But the men- 
ace to Turkey through Russia in Persia had a coun- 
teracting effect in favor of Germany. A section of 
the road was opened to traffic in 1904. In 1909 the 
building of the main line was continued. England 
now desired to participate on her own account. 
She wanted to build a road from Adana along the 
Gulf of Alexandretta, which would have been a 
profitable line. This concession, however, Turkey 
refused to make. Russia had troubles at home and 
Turkey was gaining in strength, both of which facts 
served the purpose of Germany. 

Negotiations continued. An agreement was signed 
with Russia at Potsdam, in 1911, under the terms 
of which Russia promised to put no obstacles in the 
way of the Bagdad Railway. She even gave her 



GERMANY AND THE BAGDAD RAILWAY 229 

consent to the German plan of building a branch 
line to the Persian border at Khanikin. This line 
would not only be profitable because of the passen- 
ger traffic of Persian pilgrims to the holy place at 
Kerbela, it would open the Persian markets up to 
Germany. As a result of the changed attitude on 
the part of Russia, Turkey granted definite conces- 
sions for the remaining 1,435 kilometres of the line 
from El Helif to Bagdad. The question of the build- 
ing of the last 650 kilometres to the Persian Gulf 
was now also raised. How was this last stretch of 
the line to the Persian Gulf to be constructed with- 
out antagonizing England? For England's chief 
apprehension was as to the eastern outlet on the 
Persian Gulf. This objection was never over- 
come. 

All Europe appreciated the political significance 
of the Bagdad Railway. It not only gave Germany 
a favored place in Turkey, it not only opened up 
concessions in trading opportunities of great value, 
it made her dominant in Turkey when the final dis- 
integration should come. It also gave an approach 
to England's most vulnerable point — Egypt and 
the Suez Canal. A strong Turkish army with rail- 
roads at its disposal could work havoc with the Brit- 
ish Empire in the Near and Far East. And such 
havoc was frankly acknowledged by Germans like 
Professor Rohrbach. England fully appreciated the 
menace. She desired financial control and man- 



230 GERMANY AND THE BAGDAD RAILWAY 

agement of the last section of the railroad, that 
which ended at the Persian Gulf at Koweit. On 
the other hand, the Turkish Government was will- 
ing to see this section internationalized. 

Negotiations of the Powers. 

Germany has always invited foreign capital to 
participate in the Bagdad Railway, but German 
control was always insisted upon. Despite the prof- 
its offered, sufficient foreign capital was not forth- 
coming. In 1899 representatives of the Deutsche 
Bank, Herren Gwinner, Siemens, and Huguenin, 
came to an understanding with the chiefs of the 
three principal groups of French financiers in Asia 
Minor — the Banque Imperial Ottoman, the Com- 
pagnie de Chemin de Fer Smyrne-Cassaba, and the 
Regie Generale des Travaux Publiques. French 
capital was needed to finance the undertaking, which 
promised 40 per cent, dividends to the promoters 
and investors. 

Under the terms of the concessions the railway 
company was nominally Turkish. It was to be man- 
aged by an administrative council of 27 members, 
of which 8 were to be Frenchmen, 4 Turks, 11 Ger- 
mans, 3 of whom were delegates of the Anatolia 
Railway Company, the prime mover in the affair. 
The company proclaimed itself to be international, 
but the projected arrangements were merely a mask 
for opening the financial markets of Europe to the 
enterprise, which was really under German control. 



GERMANY AND THE BAGDAD RAILWAY 231 

All of the other directors were sleeping partners. 
The Germans used their influence with the Turk- 
ish Government to thwart an alternative English 
plan for a railroad from Konia to Alexandretta and 
along the coast. English capitalists wanted to 
build the road without a Turkish guarantee, and 
the Germans used this fact as an argument against 
the English, persuading the Porte that this would 
make the road too independent of Turkish influence. 
Stories were also spread about English ambitions in 
Mesopotamia, with the result that the English 
scheme fell through and the field was left to the 
Germans. Endless negotiations took place, and for 
many years, up to 1913, in fact, the Germans con- 
tinued to invite foreign capital to co-operate in the 
railway, on the plea that the railway was wholly 
non-political and was open to all. At home, how- 
ever, a different tone was adopted. There the de- 
termination was that the direction must remain 
exclusively in German hands. 

French and English Opposition. 

Despite the assurances of Germany and the im- 
mense amount of French capital invested in the 
railway, France continued hostile to the enterprise. 
Delcasse* insisted in the Chamber of Deputies in 
March, 1902, that "The French element in the con- 
struction, exploitation, and management of the enter- 
prise shall be given a share absolutely equal to that 
of the most favored foreign element, and the Rus- 



232 GERMANY AND THE BAGDAD RAILWAY 

sian element shall have full power to enter the 
definitive company which is to be formed." 

At the same time Lord Lansdowne announced 
(March, 1902): "We cannot view the enterprise 
with a favorable eye unless English interests and 
English capital are placed upon a footing of equal- 
ity with the interests and capital of the most favored 
nation." 1 

But French and English diplomats failed to secure 
an equal footing in the administration. As a means 
of reprisal England and France aimed to create a 
"vacuum of capital" around the project. It was 
their belief that the enterprise would fail if outside 
capital could not be found, and that ultimately the 
Germans would be glad to admit French and Eng- 
lish participation into the control rather than allow 
this to happen. But the French Government was 
unable wholly to boycott the project or to insist 
upon the conditions suggested by Delcasse. Even 
though the Bagdad Railway shares were not quoted 
on the bourse, French money flowed into the enter- 
prise through Swiss, German, and Austrian bankers. 
French financiers, in fact, had on hand up to Sep- 
tember, 1913, Bagdad bonds on which they had 
advanced 90,000,000 marks. 

Financial Difficulties. 
By reason of the Anglo-French opposition to its 

1 A. Geraud, "A New German Empire," Nineteenth Century, May, 
1914. 



GERMANY AND THE BAGDAD RAILWAY 233 

financing, the building of the road progressed slowly 
up to 1913. The difficult second section over the 
Taurus Mountains was held up for a long time. 
The estimated cost of part of this section, extend- 
ing from Eregli to Elii, was $45,000,000. To insure 
the payment of Turkey's guarantees on the section, 
Germany wanted the Turkish customs duties raised 
4 per cent. But for this they were unable to secure 
French and English consent until 1913. This was 
but one in a series of moves directed by Sir Ed- 
ward Grey against the enterprise. 

The Turkish treasury had very limited resources, 
and Germany had but little superfluous capital for 
outside investments. When the German manu- 
facturer has a prosperous year he usually devotes 
the profits to enlarging his plant, often with the 
aid of French money. In the same way the peasant 
uses his profits to increase his acreage, while the 
government puts its surplus into a larger navy. 
France, on the other hand, has large savings to in- 
vest in foreign enterprises, and immense sums have 
been poured into the Near East, into Turkey, and 
the Balkans in recent years. 

The Turkish guarantees and annuities amounted 
to 15,500 francs per kilometre, and the annual 
charges of the Bagdad Railway, so far as Turkey 
is concerned, would have represented 35,000,000 
francs when the line was completed, according to 
estimates made in 1914. But the problem which 



234 GERMANY AND THE BAGDAD RAILWAY 

the railway company had to face was that of secur- 
ing the necessary capital to complete the road. 

Great Britain's Final Stroke. 

Having failed in her plan of joint control and of 
internationalization, Great Britain adopted other 
tactics, namely "compensations." In the first 
place she determined that Germany should not 
reach the Persian Gulf under any circumstances. 
This was the constant aim of all her efforts. To 
accomplish this, British statesmen saw that they 
would have to secure control of Turkish territory 
bordering on the Persian Gulf. This was accord- 
ingly done. As early as 1899 an agent of the British 
Government called upon the Sheik of Koweit and 
made a treaty with him. Whatever the negotia- 
tions were or the terms of the treaty, the result was 
that the Sheik disavowed allegiance to the Sultan 
and accepted British protection. Then the British 
foreign office informed the German Government 
that the Bagdad Railway could not be extended to 
the gulf through Koweit unless the line was inter- 
nationalized, with half the control in English hands. 

This meant the abandonment of the German 
dream of German control of Asia Minor. It meant 
an end to the "Drang nach Osten" of a through 
route to the Far East. And Germany would not 
consent to the British demand after having spent 
so much effort in securing the advantages of the 
enterprise to herself. 



GERMANY AND THE BAGDAD RAILWAY 235 

England's protectorate over Koweit was not 
finally recognized by Germany until 1913, but it was 
an established fact for several years previous. This 
closed the German outlet to the Persian Gulf, for 
it gave Great Britain a control of the eastern ter- 
minus of the line. 

Great Britain sought other compensations. One 
was a concession for the construction of railroads 
both in Asiatic Turkey and in Persia, with a view of 
re-establishing the equilibrium destroyed by the 
Bagdad Railway. She also encouraged the build- 
ing by Russia of a line from Teheran, Persia, to 
Khanikin, on the Persian frontier, as well as other 
Russian lines in the northeastern portion of Asia 
Minor. 

The Russian Government finally recognized Ger- 
man control over the Bagdad Railway in an agree- 
ment at Potsdam, in 1911. Great Britain and France 
also entered into agreements with Germany, nego- 
tiations being completed in 1913, after which the 
construction of the road proceeded rapidly. Ac- 
cording to the Franco-German agreement, the Otto- 
man Bank was to hand over to the Deutsche Bank 
its financial interest in the Bagdad Railway. The 
Deutsche Bank, in turn, was to buy this stock and 
to renounce, in favor of interested French parties, 
other railway concessions on the Black Sea coast 
and in Syria. By these arrangements Germany ob- 
tained absolute liberty of action in the Bagdad Rail- 



236 GERMANY AND THE BAGDAD RAILWAY 

way, and France secured similar freedom in other 
regions. The Franco-Turkish agreement gave 
France the right to construct railways in Armenia 
and a line from Trebizond to Sivas and other lines. 
France in return promised to support the issue of 
a Turkish loan of 700,000,000 francs in France and 
to consent, if the other powers would agree to it, 
to a 4-per-cent. customs increase in Turkey and an 
income tax upon foreigners resident there. 

French interests in Turkey were already large. At 
the end of 1913, said M. Doumergue, the French 
premier, French interests in Turkey amounted to 
almost 3,000,000,000 francs, almost wholly in Ot- 
toman Government bonds. 

In the summer of 1913 the British protectorate 
over Koweit was recognized by Germany. 

Of course, all these agreements, involving "terri- 
torial zones" and spheres of influence, tend to the 
ultimate disintegration of Turkey. France had es- 
tablished her interests in Syria, and Germany in 
Anatolia. Austria also entered the lists and de- 
manded her share, while Italy was willing to take 
any concessions she could get. 

Following the agreements of France, England, and 
Russia with Germany and Turkey, the Bagdad line 
progressed rapidly. On all of the sections from 
Adana to Bagdad work was carried on simultane- 
ously. Only about 100 kilometres of this portion 
of the road remained to be constructed in May, 



GERMANY AND THE BAGDAD RAILWAY 237 

1914. By that time the line had already crossed 
the Euphrates on a temporary bridge and extended 
40 kilometres farther. It was calculated that trains 
would run through to Bagdad early in 1917. 

After fifteen years of conflict the various inter- 
ests finally succeeded in working out a kind of bal- 
ance of power in Turkey and Asia Minor. Germany 
secured the lion's share. France had protected her 
investments. Great Britain controlled the eastern 
terminus on the Persian Gulf. All of the great 
powers had secured valuable concessions. But in 
these agreements and concessions new causes for 
controversy had been created. German political 
dreams remained unsatisfied. England was still 
menaced in Egypt, the Suez Canal, and the Far 
East. Russian, English, and German interests were 
more or less in conflict. The international agree- 
ments had patched up a truce. They had probably 
laid the foundations of difficulties which would have 
continued to menace the peace of Europe, even had 
the European war not intervened. 

The Bagdad Railway project, like the activities 
of the investors in Egypt, Morocco, China, and 
Persia, is a merging of finance and foreign politics, 
in which national security and the people are played 
with as pawns in the interest of the financiers and 
business interests. The peace of Europe was in con- 
stant jeopardy, the integrity of Turkey was a matter 
of indifference, and the balance of power was in 



238 GERMANY AND THE BAGDAD RAILWAY 

constant peril. The bankers and investors carried 
through their plans with little concern for the 
deeper consequences of their acts, and often against 
the manifest interests of their own people. Visions 
of colossal profits were too alluring for financiers to 
resist, and even the foreign office seems at times to 
have fallen in with the investors' desires. As a 
consequence of the concessions made and the al- 
liances forced, Turkey has been drawn into the war. 
Her existence is threatened as a nation, while the 
investments of the warring nations are for the time 
being valueless. 



CHAPTER XVII 
THE STRUGGLE FOR THE MEDITERRANEAN 

Indistinguishably interwoven with the financial 
activities and diplomatic moves of the European 
powers, described in the preceding chapters, is the 
struggle of the greater powers for access to, free 
passage through, or control of the Mediterranean. 
The struggle is partly political, partly financial, 
and partly commercial. It comes nearer to being 
a legitimate cause of war than any other single in- 
cident in the present European war. For it is part 
of the doctrine of the freedom of the seas. More- 
over, it vitally affects the industrial and com- 
mercial life of all of the greater powers as well as 
the Balkan states. The struggle had its beginning 
in the purchase of a controlling interest in the Suez 
Canal by Great Britain in 1875. 

All of the great powers have a vital interest in 
the Mediterranean. For a generation its control 
has been the constant object of British foreign 
policy. It is a policy concurred in by all parties. 
Control of the Mediterranean explains the aggres- 
sive diplomatic support to France in the Morocco 
incident, which nearly precipitated war with Ger- 

239 



240 THE STRUGGLE 

many; it explains the ceaseless efforts of the Brit- 
ish foreign office to block the building of the Bagdad 
Railway and German entrance into Asia Minor; it 
explains British fears of Russia and the many moves 
to prevent the expulsion of the Turk from Europe. 
The participation of Great Britain in the partition 
of Persia by which Russia was excluded from ac- 
cess to the Persian Gulf was actuated by the same 
policy as was, in part, the entente with France and 
the action of Great Britain in the settlement of the 
disputes of the Balkan states. Control of the 
Mediterranean has been the motive of British 
diplomacy for the greater part of a generation; for 
the Mediterranean is the life-cord of her empire. 

The Mediterranean a British Sea. 

The Mediterranean is in effect' a British sea. 
This is secured through the command of the western 
and eastern entrances at Gibraltar and the Suez 
Canal. The fortresses at Gibraltar are impreg- 
nable. The great guns command the narrow straits 
through which all commerce to and from the At- 
lantic must pass, as completely as the entrance to 
a harbor. This with the Suez Canal gives Great 
Britain control of the Mediterranean, which is the 
greatest trade route of the world. It enables her 
to menace the commerce of all European countries 
and to close the door at will upon all ships passing 
through it to the outside world. By reason of this 
fact all of the Mediterranean states are under the 



FOR THE MEDITERRANEAN 241 

potential control of Great Britain. This is one of 
Germany's complaints, for so long as Great Britain 
controls the gateways and trade routes to the 
Orient the commerce of other nations is not really 
free. 

To her statesmen and trading classes control of 
the Mediterranean seems vital to the existence of 
the empire. For this is the trade route to Egypt, 
India, Australia, the Chinese ports, and the east 
coast of Africa, the richest of the British colonial 
possessions. It is the link that unites these colonies 
with the mother country. Anything which im- 
perils this connection and the free passage of ships 
of war, of food, of raw materials, or the distribution 
of merchandise strikes at the life of the empire. 
The maintenance of this route, free and unim- 
peded by any hostile power, is as essential to the 
life of the British Empire as is the control of her 
island waterways. 

Mediterranean Spheres of Influence. 

At the outbreak of the war certain well-defined 
spheres of influence had come to be recognized 
about the Mediterranean. France was ascendant 
in Morocco, Algeria, and Tunis, which included the 
whole of northwest Africa, bordering on the Mediter- 
ranean and the Atlantic Ocean. Italian interests 
were recognized in Tripoli and those of Germany 
in Turkey and Asia Minor. Persia had been par- 
titioned between Russia and Great Britain, while 



242 THE STRUGGLE 

the Balkan states were the prey of all the powers, 
particularly of Austria and Russia. Great Britain 
controlled Egypt and the Strait of Gibraltar, which 
commanded both entrances to the Mediterranean. 

The fact that the Mediterranean is not an open 
sea, a free highway to all nations, is a standing ir- 
ritation to all the powers. And access to it or pas- 
sage through it is the objective of their efforts. 
The commercial and industrial life of Austria, 
Russia, Italy, and the Balkans is dependent on their 
ability to reach the sea, first, by access to a port on 
the Mediterranean, and, second, through the Strait 
of Gibraltar and the Suez Canal. 

While the territory of Germany does not border 
upon the Mediterranean, her trade and commerce 
passes through it. And Germany is England's 
growing rival in the trade of the Orient. Prior to 
the war her merchant marine was rapidly crowding 
the Union Jack from Oriental ports; her goods and 
merchandise were finding their way into every 
shop from Gibraltar to Tokio. For years Germany 
has been crowding England as a trade competitor 
and "Made in Germany" had become a night- 
mare to the British nation, accustomed for fifty 
years to a monopoly of the trade and shipping of 
the world. Belief in her supremacy had become a 
national conviction, and a challenge of her monop- 
oly by a nation which but a generation before was 
an inconspicuous peasant state could not be easily 



FOR THE MEDITERRANEAN 243 

tolerated. This challenge irritated her ship owners, 
her financiers, her great manufacturers of Man- 
chester, Birmingham, Leeds, Sheffield, and Lanca- 
shire. And when Germany entered on a programme 
of naval construction to enforce her claims for the 
freedom of the seas and the right to trade where 
she willed, unfettered by British possession of 
strategic points of the earth's surface, British opin- 
ion took exception still further. She tightened her 
hold on the Mediterranean at Morocco and in 
Persia. She entered into an alliance with France, 
the second great power on the Mediterranean, as 
well as with Russia, for the control of the eastern 
end of the sea. Finally she executed a flank attack 
on Germany and blocked the completion of the 
Bagdad Railway by assuming a protectorate over 
Koweit, the eastern terminus of the projected rail- 
way to the Persian Gulf. The action of Italy in 
throwing in her cause with the allies strengthened 
the position of Great Britain, as did the alliance 
with Russia. Greece was coerced into permitting 
a landing of troops by the allies by reason of the 
pressure which Great Britain was able to bring to 
bear on the trade and commerce of that country. 

Germany's Complaint. 

This is the substance of Germany's complaint. 
She insists that Great Britain has erected Gibraltars 
before her advance — Gibraltars which stand as a 
menace to German trade, to the German mer- 



244 THE STRUGGLE 

chant marine, to the natural expansion of the Ger- 
man Empire. These Gibraltars are found not only 
at the entrances of the Mediterranean; they are 
found in the West and East Indies, all about Africa, 
in the Pacific Seas, and in the harbors along the 
Chinese coast. Steps taken by Germany for the 
widening of her markets and the expansion of her 
spheres of influence have been met by the closed 
door, by diplomatic activities, and by a show of 
teeth on the part of the British Lion that have 
either checkmated her ambition or compelled a 
withdrawal of her claims. 

And the demand for a place in the sun is an ex- 
pression of a profound conviction on the part of 
the German people. German officials and German 
industrial classes contend that the very necessities 
of German existence demand opportunities for 
trade and development, and that this is a right to 
which her achievements entitle her. Freedom of 
the seas, freedom especially in the great inland 
Mediterranean Sea, is one of her most insistent de- 
mands. Germany does not pretend that her am- 
bitions are of a higher order than those of Great 
Britain. She, too, desires markets, concessions, 
participation in loans, and a share of control of the 
trade of the world. And the seas are the only routes 
for such participation, which routes, however, have 
been fortified by prior occupation on the part of 
England. 



FOR THE MEDITERRANEAN 245 

This led Germany to the Drang nach Osten, the 
only avenue open to her to the Mediterranean and 
the Indian Sea. It was a route by rail, easily con- 
nected and easily defended; it was a route which 
tapped the Mediterranean in Turkey and the Bal- 
kans, from Asia Minor and the Euphrates valley. 
It was a route which included harbors that could 
be easily fortified on the eastern shores of the 
Mediterranean, and it was a route which opened 
up the whole of the Orient to the rapidly expanding 
trade of Germany. In this drive was the possibility 
of a greater German Empire extending from the 
North Sea to the Persian Gulf, for an empire com- 
parable to that of Rome in the days of Trajan, 
when the Roman Empire included all of the ter- 
ritory now marked out for German influence under 
the Bagdad Railway concessions. It was an empire 
comparatively easy of defense by reason of its 
geographical position, its separation from Russia 
by the Black Sea, and the impregnable position of 
Constantinople at the Dardanelles. 

Unstable Equilibrium. 

Such was the status quo at the outbreak of the 
war. But the status quo was very unstable. It 
could not be otherwise so long as Great Britain 
and Germany faced one another with irreconcilable 
ambitions. It was liable to be upset at the slightest 
provocation. It was a mine likely to be set off at 
the lightest touch. It was a tinder-box of high 



246 THE STRUGGLE 

explosives which a careless word, an irresponsible 
speech, a reckless act might ignite. 

Other states were also in a state of tension. The 
German Drang nach Osten also meant an end to the 
centuries-long ambitions of the Romanoffs for the 
Dardanelles and an all-the-year-round port at Con- 
stantinople through which Russian wheat could 
find an outlet to the world. In addition — and this 
is a factor of tremendous importance — the whole 
financial foundation of England was in peril, as 
were hundreds of millions of dollars invested in 
shipping which might be scrapped by the construc- 
tion of the Bagdad Railway. British trade and 
British industry were under a similar menace, for 
German industrial efficiency and trade methods, 
aided by a cheap and rapid all-rail route to the 
Indian Ocean, would place the British merchant at 
a disadvantage in his best markets. Der Drang 
nach Osten was a drive at the very existence 
of Great Britain. It threatened not only her em- 
pire, it threatened her commercial supremacy as 
well. 

For several years preceding the outbreak of the 
war Great Britain and Germany had been in a 
state of nervous apprehension. Great Britain 
watched every move by Germany, while Germany 
chafed in the belief that, were she permitted to 
open a highway of her own, her perfected agencies 
of foreign trade would enable her to supplant Great 



FOR THE MEDITERRANEAN 247 

Britain as mistress of the seas and assume a position 
of supremacy in the trade of the East. 

The Limits of Diplomacy. 

In matters involving their existence nations dare 
not trust one another. The traditions of diplomacy 
do not encourage trust or confidence. And no as- 
surances that Germany could give would have 
quieted English fears; certainly they did not satisfy 
the present Liberal ministry or Sir Edward Grey. 
And Great Britain played her cards rather boldly 
to prevent the German advance to the East and to 
minimize her influence in the Mediterranean. By 
so doing she placed in the hands of German im- 
perialists apparent evidence that wherever Ger- 
many turned there she was confronted by British 
Gibraltars and British diplomacy, backed by a 
British fleet that blocked her from a place in the 
sun or any participation in the deliberations of the 
powers as to the political, financial, and industrial 
destinies of the dependent peoples of the world. 

The fact that Great Britain desired peace and 
was willing to go to the limits of diplomacy to se- 
cure it did not relieve the situation, for from the 
German view-point diplomacy had failed or had re- 
sulted in the defeat of German claims. It left Eng- 
land in possession of all of the most valuable colonies 
and trading-posts as well as the strategic spots on 
the earth's surface. Germany had been outplayed 
in Morocco; she had been excluded from Persia; 



248 THE STRUGGLE 

she had been blocked in her ambitions in Asia Minor 
and the Near East. England, France, and Russia 
encircled her and overpowered her in the diplomatic 
conventions and agreements. Each year saw some 
part of the earth's surface pass under the control 
of one of the allied powers or closed to her trade by 
preferential tariffs. None of these individual acts 
was in itself a cause of war, but taken collectively 
they boded economic as well as political isolation in 
the future. They were a silent and increasing 
menace to her industrial and commercial position. 
This is the German complaint. It is shared in 
by all classes. The checks to German advance have 
irritated not only the financiers and traders, they 
have irritated the people as well. And if we knew 
all of the facts and could analyze the psychology 
of the people we should probably find that the 
struggle for the Mediterranean and freedom of the 
seas is one of the most important causes underlying 
the present European war. The struggle might 
have been avoided if the sea were recognized as a 
free highway open to all on equal terms, so that the 
trade and commerce of the world might flow free 
and unimpeded by barriers, fortifications, or na- 
tional ownership of connecting canals, waterways, 
or strategically located passageways like Gibraltar, 
the Dardanelles, the Suez and Panama Canals, all 
of which enable the nation which controls them to 
threaten the trade and free development of all other 



THE STRUGGLE 249 

nations. But this involved a harmony of interests 
and concessions, as well as an abandonment of privi- 
leges and advantages, on the part of chancelleries, 
financiers, and trading classes that with no popular 
control over foreign affairs and no knowledge of 
conditions making for trouble was impossible. 



CHAPTER XVIII 
CHINA AND THE CHINESE LOAN 

China is outside of the sphere of greatest interest 
to the European powers, which is about the Mediter- 
ranean and the Near East, in Turkey, the Balkans, 
and Persia. The struggle for spheres of influence 
and protectorates about the Mediterranean is justi- 
fied by some by reasons of national safety. Here 
Great Britain, Russia, and Germany face one another 
in a state of nervous apprehension. Each seems a 
menace to the existence or future destiny of the 
other. To Great Britain the route to Egypt, India, 
Australia, and the Far East must be unhindered 
by any other power; to Russia the territory to the 
south and east is necessary to her growth and ex- 
pansion; while to Germany, Turkey, and Asia Minoi 
remain the only pathways to imperial expansion. 
Here is an international impasse. To the imperi- 
alist who thinks in terms of national destiny, the con- 
flict of interests is irreconcilable. It is like that of 
Rome and Carthage. 

No such problems of safety confuse the Far East- 
ern question. China, like South Africa and Mexico, 
has been merely the spoils of the concession seeker 

250 



CHINA AND THE CHINESE LOAN 251 

and the trader. Here British influences had long 
been paramount, but they were not exclusive; and 
they were founded on force. And for years the 
eyes of the financiers and concession seekers of all 
Europe have been fixed on China, waiting for some 
accident or revolution to justify spoliation. The 
Chinese-Japanese War of 1894-5 seemed to offer 
the opportunity. Following it, Manchuria and the 
Kwangtung Peninsula, Wei-hai-wei, Kowloon, Kwang- 
chow-wan, and Kiaochow were seized by Russia, 
England, France, and Germany. 

The year 1898 was rich in concessions to the 
powers. Then began the scramble of the financiers 
and the jealousies among the European banks. 
The new imperialism of finance dates from about 
this period. In each country there was a favored 
bank or group of banks which, in its hunt for mo- 
nopolies in Chinese territory enjoyed the special pro- 
tection of its home government. Finally in 1909, 
after much friction, a syndicate of English, German, 
and French banks was formed to act as a unit in 
all loans and railway matters. 

American financiers had long been active in China 
also. In 1898 a Chinese company, owning a con- 
cession to build a railway from Hankow to Canton, 
concluded a contract with the China Development 
Company, an organization of American capitalists, 
by which the American company was to raise $20,- 
000,000 for purposes of construction. In 1904 more 



252 CHINA AND THE CHINESE LOAN 

than half the shares in this company passed, in- 
directly, into the hands of J. P. Morgan & Company, 
A year previous that bank had received a promise 
from Prince Ching, the Chinese regent, that it 
would be admitted on equal terms with the English 
in the construction of the Hankow-Szechuan Rail- 
road, a promise which was confirmed in 1909 and 
which served as the basis on which the American 
syndicate was admitted, in 1910, into the interna- 
tional syndicate. 

The American syndicate undoubtedly had some 
sort of encouragement from the Taft administra- 
tion. J. P. Morgan & Company emphasized this 
point later in a statement made by that firm on 
behalf of the American syndicate, after the Wilson 
administration had suggested the withdrawal of the 
latter from the sextuple loan. Mr. Morgan said, 
in effect, that the American financiers had originally 
joined the syndicate at the solicitation of the State 
Department. This was in general harmony with 
the policies of the State Department during that 
period of our foreign policy. After the Chinese rev- 
olution, Russia and Japan forced their w&p into 
the international syndicate, which was now Known 
as the six-power group. 

Chinese Financial Needs an Excuse for Political Do- 
minion. 

Chinese finances were in a chaotic condition. 

There seemed to be danger that the annual charges 



CHINA AND THE CHINESE LOAN 253 

of $42,500,000 on the foreign debt would not be met. 
Indemnity payments were in arrears to the extent 
of some $15,000,000.* Besides, the new Chinese 
Government needed large sums for administrative 
purposes, for the army, for payment on republican 
bonds, etc. Sweeping reforms were needed to es- 
tablish a balance between revenue and expenditure. 
To safeguard the proposed new loans, therefore, the 
sextuple group, referred to above, was formed in 
February, 1912, consisting of American, English, 
French, German, Russian, and Japanese banking- 
houses. The powers represented in the group had 
each agreed to make no loan without the consent of 
the others. There was a complete financial under- 
standing or monopoly. And the demands of the 
syndicate upon the Chinese Government in return 
for loans were most exorbitant, owing in part to the 
claims of Russia and Japan, which were in a measure 
political, and in part to the urgency of China's need 
for funds. 

China needed only $30,000,000. The syndicate, 
however, insisted in 1912 on a loan of $300,000,000, 
with the stipulation that the expenditure of the loan 
and the administration of the salt monopoly, by 
which it was to be guaranteed, should be placed 
under European control. This struck at the admin- 
istrative integrity of China. It was as a protest 
against these conditions that the United States Gov- 

1 International Year Book, 1913. 



254 CHINA AND THE CHINESE LOAN 

eminent suggested, in March, 1913, that the Ameri- 
can bankers should withdraw from the agreement. 
President Wilson is reported to have said: "The 
administration does not approve the conditions of 
the loan, which touch very nearly the administrative 
independence of China." This government would 
encourage no meddling of American capital in the 
domestic affairs of China, a procedure which, in the 
case of Egypt and Morocco, ultimately brought about 
protectorates in those countries. But President 
Wilson's act is by no means to be interpreted as an 
embargo on American capital, to keep away from 
China. It was merely a protest against the terms 
of the six-power loan which threatened China's in- 
dependence and whose monopolistic powers were a 
menace to her political integrity. 

Chinese Efforts at Financial Freedom. 

The Chinese Government objected strenuously to 
the conditions of the loan and turned for help to 
independent bankers who were not included in the 
various national syndicates, of which the interna- 
tional syndicate was composed. It succeeded in 
securing small amounts from certain independent 
bankers, mainly English and German houses, but 
the help received was not of material value. When 
the English firm of C. Birch Crisp & Company, of 
London, attempted to raise a Chinese loan of $50,- 
000,000 it met with determined opposition from the 
English foreign office, which insisted on the mo- 



CHINA AND THE CHINESE LOAN 255 

nopoly rights of the Hong-Kong and Shanghai Bank. 
Nevertheless, the help received from these inde- 
pendent sources, although intrinsically little, had an 
influence on the international syndicate. It no longer 
insisted on the exorbitant loan of $300,000,000, 
but reduced its demands to $125,000,000, which was 
the amount of the loan finally agreed upon, April 
26, 1913, by the international group, which had now 
become, by reason of the American withdrawal, the 
five-power group. Moreover, instead of an abso- 
lute control by European agents of both the expendi- 
ture of the loan and the salt monopoly, it was now 
proposed to control the expenditure of the money 
advanced by a Chinese commission with European 
advisers, acting as the employees of the Chinese 
Government and to administer the salt monopoly 
by European officials in the service of the Chinese 
Government. Sir Richard Dane (British) was 
placed in charge of the salt monopoly (or gabelle); 
M. Padoux (French) and M. Konavaloff (Russian) 
in charge of the audit department; and Herr Rump 
(German) of the loan department. Dane success- 
fully reorganized the salt gabelle, so that it yielded 
$3,000,000 a month, on the basis of which the syn- 
dicate was anxious to lend China another $125,- 
000,000. 

On September 29, 1913, the English Government 
announced that Great Britain had withdrawn from 
the five-power group. But the object of the inter- 



256 CHINA AND THE CHINESE LOAN 

national agreement had been achieved. China was 
saddled with foreign "advisers." The powers now 
declared each government would be free to negotiate 
" non-political loans" and obtain industrial conces- 
sions for its own banks. 



CHAPTER XIX 

GERMAN IMPERIALISM AND THE TRADING 
COLONIES 

A few years ago Count von Bernstorff, the Ger- 
man ambassador to the United States, stated the 
cause underlying Germany's colonial policy, and his 
words may be accepted as a reflection of the official 
view. German colonies, he said, are for trade and 
emigration ultimately. "We must secure hew mar- 
kets for raw materials. If the German foreign policy 
continues to be determined according to the re- 
quirements of trade and industry, and if at the same 
time our social legislation, which guarantees the 
physical health of our industrial population, is fur- 
ther developed, Germany will for a long time to come 
have room not only for its existing population but 
for the yearly increase of a million inhabitants." 1 

Overseas trade, rather than financial exploitation, 
has been the chief motive of German colonial policy. 
There are partial exceptions in Turkey, where the 
question is confused by the desire for political ex- 
pansion. Germany wants markets for her factories 
rather than concessions for her financiers, because 

1 Annals American Academy of Political and Social Science, Jan- 
uary, 1910. 

257 



258 GERMAN IMPERIALISM 

Germany has not yet become a great investing coun- 
try like England and France. She has need of her 
surplus capital at home. She did not become a 
great manufacturing country until recently; her 
industrial growth being coincident with the last 
quarter of a century. During these years she has 
built a great merchant marine, has rapidly ex- 
panded her foreign trade, and has made her way 
into the markets of the world. Internal needs have 
taxed her financial resources to the limit. The 
banks were unable to finance the Bagdad Railway 
without the aid of foreign investors. Loans have 
been made in China, but these were largely for the 
purpose of securing "spheres of influence," raw mate- 
rials, and an opportunity for trade, rather than for 
financial exploitation. That financial imperialism 
would follow with the growth of surplus capital at 
home, there is no doubt; that her bankers have 
participated in the greedy division of territory is 
unquestioned; but the main motive of German im- 
perialism, for a "place in the sun/' has been the de- 
sire for markets and the hope of securing German 
sources of raw materials for her mills and factories. 
The main exception to this policy is in Turkey, 
where political, financial, and trading ambitions 
have united in the foreign policy. 

The Beginning of German Imperialism. 

German colonial expansion began with the found- 
ing of informal trading settlements in the Pacific 



AND THE TRADING COLONIES 259 

and the South Seas during the 70's and early 80's. 
It was coincident with the new imperialism of Eng- 
land and France in Egypt and Morocco. Great 
Britain's annexation of the Fiji Islands in 1874 
roused German resentment, for German trade had 
flourished there, but Germany was not yet ready 
to embark on a colonial policy of her own. Not till 
1880 did the government recognize these trading 
outposts and give them any financial assistance. In 
that year, however, aid was granted to the German 
Commercial and Plantation Association of the South- 
ern Seas, and at the same time Germany's connec- 
tion with Samoa began. But no territory was for- 
mally annexed for several years to come. 

In 1883 the first colonial society was formed — the 
Kolonial Verein. About a year previous the Bremen 
trader, Liideritz, had made treaties with the native 
chiefs in the territory around the Bay of Angra 
Pequena on the southwest coast of Africa. For a 
time nothing was done to confirm the treaties, al- 
though Liideritz asked for the support of his govern- 
ment. Not until Liideritz 's claims were disputed 
by the agents of the British crown did his appeals 
arouse Bismarck. Negotiations ended when Bis- 
marck flatly announced the annexation of Liideritz- 
land. This transaction gave to Germany the coast- 
land extending from the Orange River to Cape Frio, 
exclusive of Walfish Bay. 

The scramble for the division of Africa had al- 



260 GERMAN IMPERIALISM 

ready begun, although the best lands were already 
in the hands of Great Britain. France took Senegal 
and Sahara in 1880 and Tunis in 1881. Belgium 
secured the Congo Free State in 1883. Holland's 
colonies belong to an older era, as do Portugal's. 

Bismarck's Colonial Policies. 

Colonial expansion went on rapidly during the 
80's. Disputes over land on the Cameroon River 
in the northwest of Africa were settled by Bis- 
marck in the same manner as the disputes farther 
south. The German trading settlements on the 
north coast of New Guinea and in the New Britain 
Islands came under the German flag in 1884, the 
former being renamed Kaiser Wilhelm's Land, the 
latter the Bismarck Archipelago. In 1885 new ter- 
ritory was annexed in East Africa, with a wealthy 
company formed to develop it, and in the Pacific 
the Marshall Islands and part of the Solomon 
group were incorporated into the German Empire. 
All these places served as starting-points for ex- 
pansion into the neighboring territory, with the re- 
sult that in two years Germany found herself in pos- 
session of a colonial area of 377,000 square miles, 
nearly twice the size of the empire in Europe. 1 
From 1884 to 1899 Germany brought under her 
sway in all parts of the globe 1,000,000 square miles 
of territory, almost all tropical, with an estimated 
population of 14,000,000. 

x Dawson, Evolution of Modern Germany, p. 361. 



AND THE TRADING COLONIES 261 

Bismarck himself was not an enthusiastic ex- 
pansionist. He realized that Germany could never 
have colonies like Canada and Australia to keep 
her youth from emigrating to America. Even as 
late as 1899 he declared himself a "no-colony man." 
And when he finally lent support to the policy of 
expansion it was only with the approval of the 
ruling element in the Reichstag. At the time when 
Germany's colonial expansion was beginning the 
majority of the Liberals in the Reichstag were op- 
posed to it just as were the British Liberals in the 
middle of the century. Bismarck, therefore, deemed 
it necessary to ask the nation whether it agreed 
with their attitude. 

Moreover, it was Bismarck's hope that, if colo- 
nization was decided upon, it should be in the form 
of trading-posts, to be administered by trading com- 
panies. "My aim is the governing merchant and 
not the governing bureaucrat in those regions," he 
said. 

Public Support to Colonization. 

The new elections returned a majority in favor 
of expansion. The Conservatives and the power- 
ful Centre had been stanch supporters of the col- 
onies from the beginning and always remained 
so. The Centre, representing the Catholic Church, 
declared itself in favor of colonization, because in 
its opinion colonization implied the advancement 
and spread of civilization. And indeed, it must be 



262 GERMAN IMPERIALISM 

said of the clerical party that it has always been 
ready to probe colonial scandals, of which there 
have been not a few, and to insist upon decent 
treatment of the natives. In a speech from the 
throne in 1888 the Reichstag was informed that it 
was the solemn duty of the empire "to win the 
Dark Continent for Christian civilization." 1 Mean- 
while the Hereros in Southwest Africa have been 
decimated in their frequent conflicts with this 
Christian civilization. Doctor Dernburg, who be- 
came secretary for the colonies in 1907, has stated 
that in German East Africa laborers were being 
obtained under circumstances that could not be 
distinguished from slave hunts. 

The Liberals, too, representing the commercial 
interests, soon became the supporters of colonies 
as trade outlets and particularly as new markets. 
Only the Radicals and Socialists remained, until 
recently, in opposition to the progamme of expan- 
sion. At a conference of Radicals in Wiesbaden in 
1905 a resolution was adopted "against the continu- 
ance and extension of the present colonial policy." 
One of their leaders declared he would like to see 
an auction of Germany's colonies, if there were a 
chance that it would attract bidders. 2 

The fact was, the colonies had proved to be an 
enormous expense with but little return. One of 
the German governors, speaking of the African pos- 

1 Dawson, idem, pp. 370, 375. 2 Idem, p. 376. 



AND THE TRADING COLONIES 263 

sessions, said: "The fertile countries are unhealthy 
and the healthy colonies unfertile." Others besides 
the Radicals saw no use in the colonies. A certain 
"colony weariness" had spread through many 
classes. But the policy of colonization had ad- 
vanced too far, and even the Radicals realized that 
the burden could not be laid down. With the be- 
ginning of Dernburg's incumbency of the office of 
colonial secretary the prospects improved. He saw 
much promise in Southwest Africa, always conceded 
to be the best of the African colonies, as an ultimate 
home for emigrants and a valuable market. Per- 
haps, after all, the millions poured into Africa would 
bring substantial returns. The fact that many 
Germans have died in colonial quarrels is an ad- 
ditional appeal to the nation's pride and determina- 
tion to keep the colonies. 

That the Germans have faith in the future pos- 
sibilities of their African trade was shown in the 
terms of settlement after the Morocco dispute with 
France and the crisis of 1911. In that settlement 
Germany accepted three large tracts in Africa 
from the French, bordering her Cameroon territory; 
one along the Congo, one on the Ubangi River, its 
largest tributary, and one on the Atlantic coast. 
These would give her three new and valued trading 
stations in Africa in partial compensation for her 
claims in Morocco. In 1890 the Zanzibar treaty 
had been made with England, by the terms of which 



264 GERMAN IMPERIALISM 

England ceded Heligoland to Germany in exchange 
for territory in East Africa. Even the Socialists 
ceased to protest against expansion. They argued 
that if the Germans did not appropriate distant 
possessions others would do so and exploit the land 
and the natives upon it. 

The Samoan Question of 1880. 

When the Hamburg house of Godefroy, which 
had been trading in the South Seas and had owned 
plantations in Samoa, got into difficulties a new 
company was organized to take over its enter- 
prises, but only on condition that it receive a guar- 
antee from the government. Bismarck was willing 
to concede the request, in order "to save the Ger- 
man name." The Junkers were willing because the 
money would come out of the people's pocket. 
But the majority of the Reichstag — Centre, Inde- 
pendents, Social Democrats, and a part of the Na- 
tional Liberals were opposed. This was the famous 
"Samoan question," which inspired Bismarck's 
declaration to the effect that the government should 
go only so far in a colonial policy as public opinion 
approved. As a matter of fact, nothing was done in 
the direction of expansion for four years after this 
incident. 

Development in South Africa. 

In the meantime the Bremen firm of Luderitz 
had established a trading station in Southwest 
Africa, and had obtained a promise of support 



AND THE TRADING COLONIES 265 

from the government in any treaties it might make 
with the native chiefs, if they did not violate the 
rights of the natives or of any other nation. Lude- 
ritz thereupon negotiated a treaty with a native 
chief. When the English were asked if they had 
any claims to the territory, they answered that 
they did not exactly have sovereignty in these re- 
gions, but that they laid claim to all the land be- 
tween Cape Colony and Portuguese Angola. It 
was this which roused Bismarck from his indif- 
ference to colonial interests. He considered the 
British claims unjustified and a menace to Germany's 
future expansion. The result was his telegram of 
April 24, 1884, to the German consul in Cape Colony 
confirming the Luderitz treaty. The incident 
caused some excitement at the time in Cape Colony. 
This first step was followed by others. Bismarck 
took advantage of German trading settlements in 
Cameroon and Togo. Here he no longer waited till 
the traders called upon the government for support 
in their treaties, but encouraged them to negotiate 
agreements with the natives. The German East 
African Trading Company, through the agency of 
Karl Peters, who had become familiar with English 
colonial policies in London, founded German East 
Africa through its treaties with the native chiefs. 
Similar developments took place in New Guinea, 
where the German Trade and Plantation Company, 
like the Luderitz firm, was protected by Bismarck 



266 GERMAN IMPERIALISM 

against English opposition. For Bismarck had now 
gotten into the pace. 

Colonial Administration. 

Bismarck's original plan of leaving the adminis- 
tration of the colonies to the trading companies soon 
had to be abandoned. The German Southwest 
Africa Company, which was to govern that part of 
Africa and maintain a troop of soldiers for the pur- 
pose, grew tired of the expense, and the German 
Government had to step in. Risings of the natives 
were frequent and costly. In the same way the 
government was soon compelled to take over the 
administration of German East Africa. 

The monopolies granted the trading companies 
were a further hindrance to the development of the 
colonies. A monopoly of the most accessible lands 
was granted to the German East Africa Company, 
even after the administration of the colony was 
taken out of its hands. Mining monopolies in 
Southwest Africa were granted to wealthy companies, 
and 32 per cent, of the land in that colony was 
allotted to five companies. This meant a tax on 
all colonists who settled in those lands, for the 
benefit of the Berlin banks behind the colonial com- 
panies. The African companies have never ceased 
clamoring for new railways. 

The traders never succeeded as colonial admin- 
istrators, and gradually the German bureaucratic 
system was introduced. The history of German 



AND THE TRADING COLONIES 267 

domination over the black race in her colonies has 
not been a bright one. Besides scandals, the Ger- 
mans made mistakes arising from worthy motives. 
They tried to administer justice among the blacks 
in the same manner as with Germans. As Dern- 
burg frankly said, they took too much system with 
them. "We have lost the sympathy of the black 
race," said the leader of the People's party in the 
Reichstag a few years ago. The decimation of the 
Herero population has already been referred to. 
Doctor Rohrbach, imperial commissioner for South- 
west Africa, justified their treatment thus: * 

"The Hereros have lost their land, which is now 
fiscal land, and is settled by whites. The cattle 
question is also solved. The whole of the live stock 
of the Hereros has been destroyed. There are 
hardly any cattle left. Yet that does not appear 
tragic when one remembers the wonderful fertility 
of the country." 

Herr Schlettwein, who was called in a few years 
ago to instruct the members of the budget committee 
of the Reichstag on the principles of colonization, 
writes in a pamphlet, published in 1904: 

"The Hereros must be compelled to work, and 
to work without compensation and in return for their 
food only. Forced labor for years is only a just 
punishment." 

1 Dawson, idem, p. 392. 



CHAPTER XX 
GERMANY AND THE FAR EAST 

The colonial policies of the European powers are 
in general a reflection of their foreign policies. Ger- 
many is arrayed against England, and England 
against Germany. France and England have in 
recent years acted in concert, while Japan and, to a 
considerable extent, Russia have played their hands 
alone. When no national policy is involved, as in 
the Chinese loan, the financiers are permitted to do 
pretty much as they please. 

The German policy in the Far East, like that of 
the other powers, has been actuated by a desire for 
spheres of influence, for railway, mining, and trad- 
ing concessions in China and the Pacific. In a wider 
sense it has been guided by antagonism to England 
and a desire to counteract the Franco-Russian Alli- 
ance. Bismarck sought to unite Russia and France 
in a naval demonstration against Japan when, after 
Japan had come out victorious in the war with 
China in 1894-5, she seemed to threaten too great 
demands upon, and too large concessions from, 
China. As a matter of fact, at that time all of the 
European powers had taken China's defeat as the 

268 



GERMANY AND THE FAR EAST 269 

beginning of the dismemberment of the empire, and 
all of them desired to preserve the rich field from ap- 
propriation by Japan. 

Conflict of the Powers. 

Germany's ambition in the East had a financial 
and industrial as well as a political motive. China 
was a more tempting field for exploitation by con- 
cessionaires than Africa, in which country Ger- 
many had sunk immense sums of money. Rail- 
road and harbor building would proceed much more 
rapidly in this cultivated land than in wild territory. 
China's industrious population might readily sup- 
ply a good market. From 1881 to 1890 German ex- 
ports to China had already risen from 11,000,000 
marks to 19,000,000 marks, and imports from 11,- 
000,000 to 50,000,000 marks. 

The murder of the missionaries in 1897 was seized 
upon as a pretext for the establishment of the Ger- 
man colony at Kiaochow. German citizens, it is 
true, had frequently been killed on the Russian bor- 
der, but their deaths had not called so urgently for 
vengeance; and vengeance took the form of a land 
indemnity in the harbor of Kiaochow. 

After the Chinese expedition of 1900 Germany 
planned to extend her sphere in China to the hinter- 
land of the Shantung province. The other powers, 
however, were not yet ready to concede such a claim. 
China was not yet quite ripe for the partition. 

Meanwhile Japan had become a great industrial 



270 GERMANY AND THE FAR EAST 

power. She had energetically developed her in- 
dustry, but had, however, only a restricted market 
at home for her output. The German sphere in 
Shantung, the expansion of English interests on the 
Yang-tse, the American base in the Philippines, 
stimulated her to extend her own spheres of influ- 
ence. It was her expansion into Korea and Man- 
churia which brought her into conflict with Russia. 

The New Birth of China. 

Since the Russo-Japanese War "modern China' ' 
has come into being. There is a native manufac- 
turing and capitalist class that wants to oust the 
European powers, and take railroad building, etc., 
into its own hands. This class, until the time of the 
revolution, desired a strong central government to 
replace the tottering Manchu dynasty. The new 
industrial classes, however, were opposed by the 
old Chinese bureaucracy, which supported the mon- 
archy for its own selfish purposes. The bureaucrats 
knew that a strong, well-organized government would 
deprive them of the many advantages enjoyed under 
the existing chaos. They would have even pre- 
ferred that the empire be dismembered by the 
European powers than that a powerful Chinese Gov- 
ernment be established. Yuan Shih-kai, governor of 
one of the provinces and practically head of the 
government during the last years of the Manchus, 
tried to save the monarchy by raising an army and 
centralizing the finances. But the task was evi- 



GERMANY AND THE FAR EAST 271 

dently beyond his powers. The revolution broke 
out in south China in 1911. European capital did 
not know how to treat this situation. It was ap- 
parent that new inroads upon China would now 
meet with opposition from the Chinese themselves. 

German Trade Failures. 

If Germany's spheres of influence in China were 
for the purpose of insuring greater trade with that 
country, the results do not justify the means. Ger- 
man trade with China has grown absolutely, but not 
relatively. In 1901 it was 82,400,000 marks, and 
in 1909 it amounted to 161,000,000 marks. The 
first figure represented 5.99 per cent, of China's 
trade with the world, the second figure 5.87 per cent. 
of that trade. The trade of Kiaochow itself is small, 
for the industrial provinces lie to the south. Ger- 
man exports to Kiaochow dropped as the harbor 
works and buildings were completed. In 1909 the 
exports were only 147,000 marks, while imports were 
3,300,000 marks. 

English interests, including the banks and indus- 
tries, had the advantage of earlier occupation in 
China, as well as better geographical locations and 
long-developed markets in that country. One Ger- 
man bank in China, the German Asiatic Bank at 
Shanghai, founded 1889, with a capital of 20,000,000 
marks, does a good business and pays 8 per cent, 
dividends. Besides this bank there are the German- 
Schantau Mining Company, with 12,000,000 marks 



272 GERMANY AND THE FAR EAST 

capital; the China Export, Import, and Banking 
Company, with 1,500,000 marks capital; the Shan- 
tung Railroad Company, with 54,000,000 marks cap- 
ital; besides the share of German bankers in supply- 
ing the Chinese loan. 

Loans raised by China aggregated 2,400,000,000 
marks up to 1909. It is not known to what extent 
Germany participated in these loans, but evidently 
it could not have been a very large percentage or 
Germany would have a larger proportion of China's 
trade. But German capital, far from admitting dis- 
couragement, continued to urge still greater efforts 
to capture the Chinese markets. As a minor result 
we have the spectacle of the German Government 
building a higher school in China for the education 
of Chinese agents for German capital, while the 
German masses are crying for more schooling for 
their children. The revolution in China, as in other 
countries, had a stimulating effect upon German 
overseas imperialists. "Look toward China and 
build more battleships," was the tone of the imperial- 
istic press and the ship-building companies of the 
country. 

Kiaochow and the Shantung Railway. 

The murder of two Lutheran missionaries by a 
Boxer mob in 1897 gave Germany the occasion to 
secure the colony of Kiaochow in the southeastern 
part of the province of Shantung. Germany was 
only the lessee of the colony, yet she spent immense 



GERMANY AND THE FAR EAST 273 

sums upon it. She fortified Tsingtau, which had a 
garrison of 3,000 marines in normal times, and to 
which reservists flocked for the summer manoeuvres. 
Great Britain also had a footing in Shantung at 
Wei-hai-wei, on the northern coast of the province, 
opposite Port Arthur. Great Britain has not as 
yet fortified her holding, which is "defenseless ex- 
cept for the fleet." Wei-hai-wei was taken by the 
English as an offset to the Russian occupation of 
Port Arthur, when that important base passed into 
the hands of Russia. This move on the part of 
England was explained as a necessary measure to 
guard the "open door" in China. 

But to return to Kiaochow: 60,000,000 marks, at 
a conservative estimate, were spent by Germany 
merely in fitting up a strong military and naval base. 
The native population was forcibly expropriated. A 
railway nearly 300 miles long from the port to the 
capital of the province at Tsi-nan-fu, was built to 
tap the resources of the interior. The Germans sup- 
plied the money and the engineers. Ultimately the 
intention was, no doubt, to connect the Shantung 
line with the Lu-Han, the main artery of the Chinese 
system, which would have made Tsingtau an outlet 
for a large part of the trade which has hitherto gone 
to Tientsin and Chefoo. The coal in the colony was 
exclusively mined by Germans. 1 

In December, 1913, an agreement was reached 

1 E. Bruce Mitford, Fortnightly Review, November, 1914. 



274 GERMANY AND THE FAR EAST 

between the German and Chinese Governments, 
whereby a concession was granted to complete two 
important railways in the protectorate of Kiao- 
chow, at an aggregate cost of 3,500,000 to 4,000,000 
pounds. One was to run southward from Kamai on 
the Shantung Railway to Haichow, at the junction 
of the Imperial Canal with the Tientsin-Pukow 
Railway. The second was a continuation of the 
Shantung Railway to the interior from Tientsin 
westward to a point on the main line from Pekin to 
Hankow; each line to be about 150 miles long. The 
capital, material, and chief engineer were to be fur- 
nished by Germany, although the lines were to be 
built as imperial state lines by the Chinese ministry 
of traffic. 

The harbor of Kiaochow was captured by Japan 
during the early months of the present war, and with 
it all of the railways and concessions and trade con- 
nections which Germany had so laboriously ac- 
quired. This probably means an end of German 
territorial influence in the Far East. It is one of 
the most substantial losses to her overseas empire. 



CHAPTER XXI 
GAINS AND LOSSES OF IMPERIALISM 

What are the gains from the colossal outlay for 
imperialism, for naval appropriations, for arma- 
ments? Does imperialism pay even in the coin of 
the realm? Are there any dividends at the end of 
the year? Have the governing countries anything 
to show for the outpourings of wealth and sacrifice 
that go into the dominion of weaker peoples and 
the exploitation of helpless countries? 

It should be possible to strike a balance of gains 
and losses, and find some return that justifies the 
great powers in continuing the struggle for a place 
in the sun. We should know who it is that gains, 
if anybody gains. We should know what they gain 
and how much. And, above all, we should know 
whether those who gain pay for their gains; or are 
the gains of the financiers and war traders and the 
commercial classes made by a few, and the financial 
cost and human sacrifice shifted to the many, who 
have no possible interest in imperialism? 

But the imperialists will not permit us to present 
such a balance-sheet; to set down the gains and 
the losses, not only to life but to the material well- 

275 



276 GAINS AND LOSSES OF IMPERIALISM 

being of the people as well. Those who insist upon 
knowing are derided as mere materialists. When 
pushed from one untenable position to another 
the imperialist silences objection by talk of patriot- 
ism, the destiny of the country, a place in the coun- 
cils of the powers, and an appeal to the fate of 
China and Belgium. 

Do the manufacturing classes gain? Does trade 
follow the flag? Is it necessary to find an outlet 
for our surplus wealth production in foreign parts, 
and do we succeed in doing so as a result of all our 
efforts? Can it be shown that labor gains even 
indirectly by the expansion of markets and by being 
kept employed? The experience of Germany and 
England answer these questions in the negative. 

Expense of the Colonies. 

Prior to the war there was a very general ap- 
preciation in Germany that her colonial policy had 
been a failure. But she must have a place in the 
sun, even though it be arid, unproductive land. And 
hope has been kept alive by promises, and a public 
opinion has been manufactured that a state cannot 
be great unless it has dependent people as part of 
its possessions. This is one of the age-long fictions 
of empire. It has seized the United States, and 
many persons in influential quarters would have us 
extend our sheltering arms to Mexico and Cuba. 

The cost of the various possessions and pro- 
tectorates of Germany to the end of the fiscal year 



GAINS AND LOSSES OF IMPERIALISM 277 

1906 was about $160,000,000, according to a state- 
ment furnished the Reichstag in 1907. Of this 
amount the share of East Africa was $22,500,000; 
Cameroon $6,375,000; Togo $1,000,000; South- 
west Africa $23,750,000; New Guinea $1,750,000; 
Archipelago $625,000; Samoa $350,000; Kiaochow 
$25,500,000; besides $5,000,000 paid to Spain for 
concessions in the Caroline, Marianne, and Pelew 
Islands; $875,000 for the principal insurrections 
in East Africa; and immense sums spent in the 
Southwest African War. The total expenditures 
for colonial expansion are over $325,000,000. This 
does not take account of the Chinese expedition, 
costing $116,500,000, or of the mail steamship sub- 
ventions, naval extension, telegraphs, railways, etc. 
The expenditure on the colonies was estimated at 
about $10,000,000 a year for some time to come, not 
providing for any wars. 

Many lives, too, have been lost in the tropical 
colonies. In the Cameroon alone there were 17 
military expeditions of all kinds between 1904 and 
1908, and there has been continual unrest there 
and in other parts of Africa. The cost of fitting 
out Kiaochow as a fortified base is estimated, con- 
servatively, at $15,000,000. 1 Moreover, in addition 
to a great navy, the government faced the neces- 
sity of providing a permanent colonial army. 

In 1906-7 the subsidies voted by the empire were 

1 E. Bruce Mitford, in Fortnightly Review, November, 1914, p. 782. 



278 GAINS AND LOSSES OF IMPERIALISM 

$21,811,250, and were apportioned as follows: 
East Africa $1,465,250; Cameroon $726,000; South- 
west Africa $16,167,750; Kiaochow $2,933,750; and 
smaller amounts elsewhere. The largest part of the 
expenditure in Southwest Africa was military ex- 
penditure, which was not repeated in subsequent 
years. The colonies gathered some little revenue 
for themselves, too, in the shape of customs duties 
and local taxation. In 1906 this was altogether 
$2,055,250, and most of the sum came from alcoholic 
liquors which work havoc on the natives. Local 
taxation produced $4,817,500 in 1906. 1 

The Returns from Colonization. 

What are the returns from this investment? Is 
there anything in the claim of the trading classes, 
that colonial possessions or spheres of influence 
must be secured to provide markets and absorb the 
surplus wealth produced at home? What has been 
the success of the country that of all others is most 
thoroughly organized to promote foreign trade and 
has devoted the most scientific thought to the sub- 
ject? 

Germany has made the most strenuous efforts 
to make colonization pay. She has built up a navy 
at tremendous cost; she has secured the second 
largest merchant marine in the world; she has 
trained thousands of men in the most efficient way 
in her commercial colleges, in her industrial schools, 

1 C. S. Goldman, Nineteenth Century, February, 1912. 



GAINS AND LOSSES OF IMPERIALISM 279 

in foreign travel, to enable her manufacturers to 
share in the trade of the world. No country has 
done a fraction of what Germany has done to 
place her products in foreign parts. Here, if any- 
where, we should see dividends from imperialism, 
from Kiaochow, from Africa, from Turkey, from 
the less civilized peoples of the world. 

Up to the outbreak of the war Germany's colonial 
trade had been most disappointing. The vast out- 
lay that had been made had brought but little re- 
turn. The colonial import and export trade of 
the colonies for the twenty years ending in 1908 was 
but $80,000,000, which is less than the value of 
the goods sold to Switzerland every year. Eng- 
land's trade with Germany approached $500,000,000 
a year. England was Germany's best customer. It 
would seem to have been good business to try and 
remain on good terms with her. And a large part 
of this trade with the colonies during the past two 
decades has been in exports for the construction of 
public works, for stores for the army and the navy, 
and for munitions of war. These can hardly be 
considered profitable to the home country, what- 
ever the profit of the munition makers may have 
been. The entire foreign trade of the colonies in 
1905 was but $48,000,000, of which about $35,- 
000,000 was in imports and $13,000,000 in exports. 
From the laboriously developed colonies in South- 
west Africa there were no exports at all, while the 



280 GAINS AND LOSSES OF IMPERIALISM 

imports into these colonies of $6,250,000 were largely 
in clothing and supplies for the white German pop- 
ulation, which numbered 10,000. Only Togo was 
financially independent in 1908. 

Overpopulation and the Pressure of Population. 

The imperialists of Germany have given a pop- 
ular appeal to colonial ambitions (1) by insisting 
that an outlet must be offered to overpopulation 
at home and (2) that new sources of supplies of raw 
materials must be found from German controlled 
dependencies. The results of twenty years of 
colonialism are analyzed by Karl Radek, a well- 
known writer, in a work entitled Der deutsche 
Imperialismus und die Arbeiterklasse, published in 
1912. 

According to this authority neither the Germans 
nor the French are willing to emigrate to the newer 
colonial dependencies. The German workman is 
tolerably well off at home, while the very general 
prevalence of peasant proprietorship in France has 
always kept the people of that country from emi- 
grating. There has never been much emigration from 
France to America, and since 1885 the emigration 
from Germany to the United States has fallen to 
the negligible number of 30,000 a year. France has 
spent 7,000,000,000 francs in the seventy years of 
her dominion in Algeria, and in all that time only 
364,000 Frenchmen have found their way to that 
colony. In Tunis, after thirty years of French rule, 



GAINS AND LOSSES OF IMPERIALISM 281 

there are 24,000 French settlers and 83,000 Italians. 
Yet both these countries are very close to France. 

German Colonization. 

German colonization is even less promising. As 
a matter of fact, German colonization began just as 
emigration from Germany began to cease. Her 
population, though growing with great rapidity, was 
finding employment in the expanding industry of 
the country. Emigration had been much greater, 
both absolutely and relatively, when Germany was 
still an agricultural country. According to Radek, 
of the 269,441 persons who emigrated from Germany 
in the decade, 1901-10, only 596 went as genuine 
settlers to the colonies. This is only natural, as 
those who leave their native country do so to in- 
crease their wages, and usually go to such countries 
as the United States. There is no industry to speak 
of in the German colonies. They have no coal or 
iron, and have the additional disadvantage of a 
poor climate. Yet the German workman is taxed 
to support the colonies, and may be called upon to 
offer his life in wars for them when he is being 
crowded out of work in his own country by the 
cheaper labor that is invited into the country from 
southeastern Europe. 

In Southwest Africa, the most promising of the 
African colonies for white settlers, the government 
sought to encourage colonization by offering a 
bonus of $1,500 each to the 22,000 volunteer sol- 



282 GAINS AND LOSSES OF IMPERIALISM 

diers who took part in the expeditions to that terri- 
tory, if they would remain as farmers. Only 5 per 
cent, remained. In assigning the reasons for this 
condition, Dawson says: 1 

"It is certain that agriculture must always be the 
chief source of wealth of all the colonies, but the 
cost of farming on a large scale, which is the only 
kind possible, is prohibitory except for people with 
large capital. In Southwest Africa a farm capable 
of giving any return must be at least 25,000 acres 
in extent. Indeed, a capital of from 500 pounds to 
2,500 pounds is necessary in order to be admitted 
to any of them as a settler. A laborer must deposit 
the amount of return fare if he fails to find work 
within fourteen days." 

Colonies and Raw Material. 

It is further urged that German industry needs 
the colonies as sources of supply for raw materials. 
This, too, is not supported by experience. But the 
imperialists urge this argument in a plausible way. 
"Why," they say, "should not Germany produce 
in her own possessions the raw materials we now 
get from foreign countries? This would insure our 
supply; it would prevent arbitrary dictation of 
prices; and would keep our money from going to 
foreigners." If true, such arguments might justify 
colonies and the expense which they entail. But 
what are the facts? 

Trade statistics show that in 1898 80 per cent, of 
Germany's imports, and in 1908 83 per cent, of 

1 Evolution of Modern Germany, p. 395. 



GAINS AND LOSSES OF IMPERIALISM 283 

them, consisted of raw materials and foodstuffs. 
It would possibly be an advantage to German in- 
dustry if German colonies could be depended upon 
to supply raw materials for German factories. But 
the fact is the colonies supplied only an insignificant 
proportion of it, and they would never be able to 
supply very much more. Even if they could, Ger- 
man industry would not be materially better off by 
reason of that fact. 

In 1910 Germany imported goods to the value of 
8,934,100,000 marks, of which 7,661,500,000 marks 
came from America, Europe, Australia, and New 
Zealand. The remainder, 1,272,600,000 marks, was 
from Asia, Africa, and Polynesia, and of this amount 
36,000,000 marks must be taken out as Japan's 
share. Therefore only 1,236,000,000 marks' worth 
of African or Asiatic raw materials remain, or about 
one-seventh of German imports, which might possibly 
be produced in German colonies. 

Experiments in Southwest Africa. 

What success has Germany had in forcing a sup- 
ply of raw materials from her own possessions? 
The government endeavored to develop Southwest 
Africa as a source of supply. Experiments in cotton 
raising on a large scale have been encouraged, espe- 
cially since Dernburg's administration. By 1908 two 
companies had acquired 150,000 and 50,000 acres of 
land, respectively, in the neighborhood of the Vic- 
toria Lakes. The African Cotton Company was 



284 GAINS AND LOSSES OF IMPERIALISM 

formed, with a capital of $2,500,000, for the general 
development of cotton planting and trading in the 
colonies, especially in East Africa. 

But very little cotton came from the African col- 
onies. The growth of the trade was hampered by 
lack of transportation facilities. In spite of all the 
money that had been spent, much more was needed 
for railways before there could be any adequate 
return. 

Other more favored countries are the natural 
sources from which raw materials will probably con- 
tinue to come. In 1910 Germany bought cotton to 
the amount of 73,000,000 marks from Egypt and 
46,000,000 marks from British India, while she re- 
ceived 406,000,000 marks' worth from the United 
States. The monopoly of the supply of cotton by 
America and Great Britain is a disadvantage to the 
German manufacturer, it is true, but the German 
colonies would never be able to relieve the situation. 

Difficulties of Colonial Development. 

The difficulties of cotton raising in East Africa, 
Togo, and Cameroon are almost insurmountable. 
The few large planters already complain that they 
are unable to get enough native labor to work the 
fields. Forced labor results only in insurrections. 
Even in Southwest Africa, where the climate is best 
suited for cotton raising, progress has been slow. 
The Hereros there are more unmanageable than any 
other natives. In East Africa, where the natives 



GAINS AND LOSSES OF IMPERIALISM 285 

take more readily to cultivation of the fields, they 
live under tribal conditions of landholding, far from 
the territory suitable for plantations. Capitalists 
urged more railways for the African colonies on the 
plea that cheaper transportation would encourage 
cotton planting. But that result is problematical. 

Capital refuses to invest in the colonies, and this 
is the best proof that the colonial empire is not a 
valuable source of supply. Up to 1907 German cap- 
ital scarcely went to the African colonies at all, and 
by 1909 only 1,700,000 marks had been invested 
there in cotton-planting experiments, according to 
the government report on the cotton question. 
"And yet they try to tell us," says Radek, "that the 
destiny of the German textile industries depends on 
the solution of this African cotton question." Cap- 
ital remains away because profits are too uncertain 
and slow, and capital wants immediate profits. The 
African colonies might not, and probably would not, 
be able to contribute substantially to the supply for 
one hundred years. 

But even if the supply were forthcoming the Ger- 
man manufacturer would be no better off, even if 
he received his cotton from his countrymen in East 
Africa, for the latter would not sell below the market 
price, which is determined in the world markets. 
And if, by any chance, a large amount of foodstuffs 
should be raised in the colonies, the Agrarians, who 
control the government at home, would see to it 



286 GAINS AND LOSSES OF IMPERIALISM 

that the products of the colonies did not enter the 
country under a lower tariff than those from America 
or any other foreign country. For the Agrarians 
or Junkers have never been willing to see their own 
interests jeopardized by outside competition. 

English Experience. 

Nor does England make a better showing for her 
colonies and the policy of imperialism and overseas 
possessions. As a matter of fact, even under the 
best of conditions the nation loses by the exporta- 
tion of the capital, much of which goes to cheap na- 
tive labor instead of to English working men, while 
the profits all go to the moneyed classes. 

The low wages and long hours of labor in the 
Egyptian and Indian cotton-mills, which countries 
are not covered by the factory or hours-of -labor acts, 
tend to lower the standard of living in the Man- 
chester Mills. They rob the home manufacturer of 
his markets and the British workman of employ- 
ment. 

Professor Hobson estimates the import and export 
trade of the kingdom at about one forty-fifth part 
of its total income. The value of the import and 
export trade rose from 547,000,000 pounds in 1870 
to 765,000,000 in 1898. The per-capita value, how- 
ever, remained almost stationary, even falling a 
little from 20 pounds to 19 pounds. From 1884 to 
1898 the trade between the United Kingdom and its 
possessions rose only from 184,000,000 pounds to 



GAINS AND LOSSES OF IMPERIALISM 287 

190,000,000 pounds, while the expenditures on 
armaments increased during the same time from 
27,000,000 pounds to 40,000,000 pounds, not includ- 
ing war costs. 

Great Britain imports more than three times as 
much from foreign countries as from her posses- 
sions, and exports twice as much to foreign coun- 
tries as to her possessions. In the year 1900 only 
21 per cent, of her imports came from her posses- 
sions, as compared with an average of 23 per cent, 
from 1891 to 1895, this in spite of the fact that 
within the past twenty-five years Great Britain 
has increased her empire by about one-third. Her 
trade with France, Germany, and the United States, 
however, has greatly increased. These countries 
are England's industrial rivals and might be aroused 
by her imperial policy. Her import trade with the 
United States is greater than that with all her 
colonies. England's profit from foreign and colonial 
trade, according to Sir Robert Giffen, was only 
18,000,000 pounds in 1899, as compared with a 
profit of from 90,000,000 to 100,000,000 pounds 
from foreign and colonial investments. 1 

Nor has England's recent expansion been for 
the sake of emigration. In the year 1900 there 
emigrated to the United States 102,797 subjects of 
the United Kingdom, while only 18,443 went to 
Canada, 19,922 to Australia and New Zealand, 

1 Brailsford, The War of Steel and Gold, p. 77. 



288 GAINS AND LOSSES OF IMPERIALISM 

20,815 to the Cape of Good Hope, and 11,848 to 
other places. 1 

Failure of Imperialism for Trading Purposes. 

There is little in the experience of Germany, 
England, or France to support the assumption that 
trade follows the flag, or that imperialism is justi- 
fied on trade grounds. A people cannot be forced 
to buy if they do not want to do so, and they cannot 
be compelled to accept the goods of one country if 
those of another are better suited to their wishes. 
The real trade of the world is among the civilized 
peoples; it is between the great powers. Germany 
sold $290,000,000 worth of goods to Great Britain 
in 1913; her trade with Russia was very large, as 
it was with the other now belligerent powers. And 
trade is reciprocal. It does not flow only one way; 
and as a matter of fact it cannot continue to flow 
in one direction for any great length of time, be- 
cause goods must be paid for in goods rather than 
in money. The real markets for foreign trade are 
with the great powers rather than with the colonies 
and dependent peoples. 

Thus far there is nothing to justify the belief 
that imperialism pays from a trading standpoint; 
it does not give employment to labor or care for 
the problem of surplus population at home. De- 
pendencies are almost wholly a loss, not only in 
men and effort but in money as well. They are a 

1 Hobson, J., Imperialism, p. 49. 



GAINS AND LOSSES OF IMPERIALISM 289 

burden to the owning countries. Only when these 
countries are exploited by force or coercion are 
they a source of profit to the owning country and 
then the gain is to the great financiers and munition 
makers. 

Neither are colonies a source of raw materials, 
as has been confidently hoped by Germany. Nor 
do they offer a place for colonization for increasing 
population at home. All of the mercantile and 
trading arguments for colonies have fallen to the 
ground in the light of experience. 



CHAPTER XXII 
SHIFTING THE COST OF WAR 

There would be an end of war and preparations 
for war if the cost were borne by those responsible 
for war. There would be an end of armaments and 
preparedness if incomes and inheritances and the 
landed estates of the feudal classes paid for the pro- 
tection which their privileges enjoy. 

War and preparations for war are possible only 
because the ruling classes are able to shift a great 
part of the cost onto the poor by indirect taxation 
and loans. War expenditures are tolerated only 
because the burdens are concealed in the increased 
cost of the things the people consume. "The art 
of plucking the goose without making it cry out" 
has been developed to a high state of perfection at 
the hands of the war makers. 

This is as true in the United States as it is in 
the autocratic countries of Europe. 

Shifting the burdens of war is the final move of 
the ruling classes. Indirect taxation is the method 
by which it is accomplished. Indirect taxation has 
always been a favorite device of the aristocracy. 
It is a feudal survival from which democracy has 
been unable to escape. In England it was born in a 

290 



SHIFTING THE COST OF WAR 291 

conspiracy between Charles II and the English land- 
owning aristocracy, when the aristocracy coerced the 
King into giving up his feudal land taxes, by which, 
under the mediaeval system, the crown was supported. 
Under this compact the King was permitted to 
collect excise duties upon articles of consumption 
on condition that he give up the land taxes paid 
by the great landowners. The King secured his 
revenue, but he collected it from the poor. The 
aristocracy, on the other hand, secured exemption 
from taxation upon its landed estates, which under 
the feudal system were subject to rents and dues 
to the crown, just as the peasants and serfs were 
subject to rents and dues to the overlord. 

This conspiracy, sanctioned by Parliament, which 
was merely a council of great landowners, con- 
tinued unchallenged until 1909. Not until the 
present Liberal ministry came into power was the 
compact questioned. 

But the excise taxes are still fastened upon the 
people. They and customs duties on goods imported 
into the country remain the source of a great part 
of the national taxes of the British Empire as well 
as of the other powers of Europe. And these taxes 
bear most heavily on the poor, by whom they are 
for the most part paid. Indirect taxes are exagger- 
ated poll-taxes. The poor man, it is true, consumes 
less tea, coffee, sugar, salt, beer, and tobacco than 
does the millionaire, but the difference is not material. 



292 SHIFTING THE COST OF WAR 

Indirect Taxes in the United States. m 

One of the first acts of Alexander Hamilton in 
his administration of the Treasury Department was 
the enactment of protective tariff and excise dues. 
They fell in with his aristocratic instincts and con- 
cern for the propertied classes. The excise taxes 
were soon repealed, but the customs duties remained. 
Up to the Civil War, however, the customs rates 
were low, the expenditures of the government mod- 
erate, and the burden on the people easily borne. 

The necessities of the Civil War led to an im- 
mediate and rapid increase in indirect taxes of all 
kinds, both customs and excise. Added to the na- 
tion's needs was the clamor of the industries of New 
England and Pennsylvania for protection, a protec- 
tion which soon became prohibitive. Duties were 
increased and still further increased, while a rapidly 
growing population with a relatively high standard 
of living afforded a market for foreign commodi- 
ties. These taxes yielded an immense revenue that 
had to be spent in order to prevent the accumula- 
tion of a surplus that would in time imperil the 
continuance of the protective tariff. The old man 
of the sea was engrafted upon us by the necessities 
of the Civil War, and when the war was over the 
protected interests were so powerful that they pre- 
vented a reduction of the tariff or a return to the 
moderate expenditures which had previously pre- 
vailed. 



SHIFTING THE COST OF WAR 293 

During the forty-three years from 1870 to 1913 
scarcely a dollar of the Federal revenue was col- 
lected from wealth ; property, or income. The bur- 
dens of the government were borne by those least 
able to bear them. Privilege was ascendant, and 
privilege was interested in a high tariff, in high 
finance, in a big navy, and in imperialism generally. 
Up to the recently enacted direct taxes, which 
yielded $60,000,000 in 1914, the whole cost of the 
government was collected from indirect taxes on 
consumption. No nation of Europe, unless it be 
Russia, has ventured to shift the burdens of the state 
onto the consuming classes as has the United States. 

During the fifty years following the war not less 
than $20,000,000,000 has been collected from indi- 
rect taxes upon sugar, wool, clothes, cotton goods, 
lumber, chemicals, glass, tobacco, beer, oleomarga- 
rine, distilled spirits, and other articles of consump- 
tion. In recent years the total revenues from these 
sources has amounted to $600,000,000 annually. 

Herein is one cause of poverty and the unjust 
distribution of wealth. Herein is one explanation of 
war and preparations for war. So long as those who 
promote war and profit by war are able to escape 
the costs that war involves, they can afford to plunge 
peoples into it with little fear of the consequences. 
Great Britain. 

In no country of western Europe is so large a 
percentage of the people on the verge of poverty 



294 SHIFTING THE COST OF WAR 

as in Great Britain. The system of taxation both 
local and national is adjusted to relieve the landed 
and ruling aristocracy from its burdens. Local 
taxes or rates are paid by the tenant rather than 
by the property owner. Land, houses, and improve- 
ments as such are exempt. The local taxes are 
determined by the amount of rent and are paid 
by the occupant. This is one of the explanations 
of the poverty of Great Britain, for the local taxes 
are very heavy. A great part, at least one-half, 
of the imperial taxes are shifted in the same way 
onto the poor, despite the heavy income and in- 
heritance taxes. In 1914, $178,842,900 was col- 
lected from customs taxes levied upon tea, cocoa, 
coffee, sugar, tobacco, wine, and spirits — all articles 
of universal consumption. The duty on tea, which 
is universally used, has been raised to above 100 
per cent. The excise taxes are also heavy. In 
1914 $198,289,785 was collected from excise taxes 
imposed upon articles of consumption. In that 
year the total imperial taxes from indirect sources 
amounted to $427,049,400. 

We are accustomed to think of Great Britain as 
a free-trade country, and such she is on raw materials 
and most manufactured articles. But food is taxed, 
and taxed heavily. The people of Great Britain 
pay the highest per-capita taxes from customs duties 
of any nation, including even our own. And in 
the aggregate they are next highest to the highly 



SHIFTING THE COST OF WAR 295 

protected United States. The per-capita customs 
revenues of Great Britain (1909) were $3.70, those 
of Germany were $2.50, of France $2.50, and of 
Austria-Hungary $1.75. 

In 1909 France collected $100,000,000 from cus- 
toms duties; Germany collected $155,000,000; and 
Russia $135,000,000. Other taxes yielded $460,- 
000,000 in France; $280,000,000 in Germany; and 
$225,000,000 in Russia. Russia obtained $530,- 
000,000 from miscellaneous sources, of which ap- 
proximately three-fourths, or $400,000,000, came 
from the government monopoly of distilled spirits, 
paid almost exclusively by the peasants and the poor. 

Indirect Taxation and Militarism. 

We tolerate indirect taxation only because we 
do not know we are paying it. This is why it is 
such an easily worked device of the ruling classes. 
If we were all subject to an income tax of the same 
amount there would be a universal protest. In- 
direct taxes bear no relation to ability to pay, to 
wealth owned, or income enjoyed. Moreover, in- 
direct taxation makes national extravagance pos- 
sible. Money can be spent by the government in 
any sum and for any purpose, and little protest is 
made. The cost of government is so completely 
disguised that we cannot complain and cannot 
organize to resist. 

Indirect taxation is the invaluable ally of mili- 
tarism. It makes militarism possible. For the 



296 SHIFTING THE COST OF WAR 

owning classes would not pay the cost of war if 
it were shifted onto wealth and incomes rather 
than consumption. There would be a cry of pro- 
test from the privileged classes if the $3,500,000,000 
collected by indirect taxation by the eight leading 
powers in 1909 were paid by taxes on the things they 
own. 

The total collections and per-capita burdens from 
customs and excise taxes in 1909 were as follows: 1 



Customs Revenues 

Peb Head 

Pounds s d 

United States 60,142,387 13 6 

United Kingdom 33,687,000 14 10 

Germany 31,707,157 10 

Russia 27,431,700 3 5 

Austria-Hungary 23,494,283 9 

France 19,834,280 10 1 

Italy 13,639,358 8 

Japan 4,837,624 1 10 

£214,773,789 
Internal or Excise Taxes 

Peb Head 

Pounds £ s d 

United Kingdom 118,268,000 2 12 

France 91,851,802 ..2 6 9 

Austria-Hungary 71,561,261 .1 8 

Germany (Empire and Prussia) 56,348,176 17 8 

United States 49,242,529 11 9 

Russia 45,421,800 5 8 

Italy 36,938,604 1 1 6 

Japan 27,993,886 10 6 

£497,626,058 



1 Lawson, Modern Wars and War Taxes, pp. 110, 112. 



SHIFTING THE COST OF WAR 297 

Of this sum 30 per cent, came from customs and 
70 per cent, from internal sources. Strange to say, 
it was the more democratic countries of Great 
Britain, the United States, and France that col- 
lected the largest sum per capita from these taxes. 

The burdens of taxation are still further height- 
ened in these democratic countries by reason of the 
fact that a relatively small part of the total revenue 
comes from productive sources, such as the state- 
owned railways, mines, etc., while Germany, Aus- 
tria, and Russia derive immense profits from state- 
owned utilities, which are used to reduce taxation. 

Economic privilege in England, France, and the 
United States not only shifts the burdens of taxa- 
tion onto the poor, but the profits of private own- 
ership as well. In Great Britain 79.9 per cent, 
of the imperial revenue comes from taxation and 
only 20.1 per cent, from proprietary sources, such 
as the post-office, dividends on Suez Canal stocks, 
and occasional windfalls from the woods and fores- 
try departments. In Austria (1909) taxation pro- 
vided 75.20 per cent, of the total revenue, in France 
70.53 per cent., in Italy 58.02 per cent., in Japan 
57.58 per cent., in Germany 47.97 per cent., in 
Hungary 43.35 per cent., in Russia 28.84 per cent., 
and in Prussia 12.93 per cent. 1 Productive activ- 
ities, like railroads, mines, forests, and government 
monopolies, yielded the remainder. 

1 Lawson, supra, p. 116. 



298 SHIFTING THE COST OF WAR 

War Debts. 

All other war indebtedness sinks into insignificance 
in comparison with the colossal costs of the present 
European war, which have amounted to approxi- 
mately $20,000,000,000 in fourteen months. Ajid 
only through the issuance of loans can modern wars 
be carried on. But the payment of these loans, like 
the current cost of government, is shifted largely 
onto the consumer. It is paid by succeeding gen- 
erations through indirect taxes. 

The interest upon the public debts inherited from 
past wars is not included in a nation's military ex- 
penditures, as it should be. "It might be within 
the mark," says Lawson, "to say that three-fourths 
of the British national debt has been spent on fight- 
ing and helping other nations to fight." The inter- 
est on this debt has been from 4,000,000 to 28,000,000 
pounds a year, three-quarters of which would be 
15,750,000 pounds. All of the military nations 
have huge aggregates of previous war bills ninning 
on indefinitely at compound interest. The national 
debt of France in 1909 was $6,541,995,000, which 
amounted to $165 per head of her population; of 
the United Kingdom $3,612,315,000, or $84 per 
head; and of Germany $3,381,190,000, or $59 per 
head. 

As to what the debt and interest charges of the 
European powers will be when the war is over no 
one can conjecture. The indebtedness created dur- 



SHIFTING THE COST OF WAR 299 

ing the first fourteen months of the war is estimated 
at $20,000,000,000, or nearly as much as the total 
war indebtedness of Europe prior to 1914. The ex- 
penditure for the second year is estimated at $35,- 
000,000,000; at the end of which time the present 
war debt may exceed $50,000,000,000, or more than 
the total foreign investments of all of the great 
powers of the world. The annual interest charges 
have already been increased by $1,000,000,000; at 
the end of a second year they will amount to possibly 
$3,000,000,000. And this does not include pen- 
sions, the maintenance of hospitals, invalid homes, 
and institutions for millions of disabled; it does 
not include the cost of repairing the ravages of 
war or of credit to be extended to manufacturers 
and farmers, if the industry of the devastated nations 
is to come to life again. 

And if the ruling classes are able to do so, they 
will shift the burden onto labor, onto the poor; it 
will be paid by those who have already offered their 
all at the front. Of all the injustice of war and class 
rule, the shifting of the cost of war from the posses- 
sions and privileges of the rich onto the backs of 
those in no wise responsible for war is possibly the 
cruelest. 



CHAPTER XXIII 
PRIVILEGE THE CAUSE OF WAR 

Fkom the foregoing discussion it is apparent that 
the people do not make war. War has little or 
nothing to do with national ambitions; it has 
nothing to do with the desires of peoples. It is in 
no way related to their needs, their safety, or their 
lives. Wars and preparations for war are economic. 
They are born of privilege in politics, privilege in 
finance, privilege in trade. All other causes have 
become secondary. In many ways war is more 
selfish, more cruel, and more senseless now than in 
any previous age in history. In the distribution of 
burdens it is far more unjust than it was in the 
Middle Ages. 

Privilege is as ruthless in its international activi- 
ties as it is in domestic politics; as it is in Germany 
under the Junkers; as it is in Great Britain under 
the aristocracy; as it is in Russia and Austria; as it 
is in the United States through the franchise-seeking 
interests and public-service corporations. Economic 
privilege threw Ireland into the throes of civil war 
over the Home Rule bill. The ruling classes sup- 
ported armed rebellion in Ulster. And privilege has 
not hesitated to go to similar lengths in Colorado, 

300 



PRIVILEGE THE CAUSE OF WAR 301 

in West Virginia, in city after city where its power 
was challenged by the community. 

The war makers are powerful in international af- 
fairs in direct proportion to their economic power in 
their own country. They are powerful in Russia, 
Germany, Austria-Hungary, and Great Britain. 
They are weak in France, Switzerland, Holland, 
Scandinavia, and Denmark. The countries of widely 
distributed wealth are the peaceful countries; the 
militarist countries are those in which the aristoc- 
racy still owns the land and wealth of the nation. 
Aristocracy and democracy are alike a reflection of 
the economic foundations of the state. 

The New Imperialism. 

In a generation's time high finance and industrial- 
ism have leaped over the narrow nationalism of pre- 
vious times. A new imperialism has come into 
existence, based upon foreign loans, concessions, 
spheres of influence, and monopoly of trade. Sur- 
plus capital created these conditions. It reached 
out to the unexploited places of the earth and ulti- 
mately subjected the whole world to its sway. The 
making of munitions is a further expression of the 
same force. The industry is closely related to the 
financial institutions as well as the ruling classes, 
who are financially interested in what is the most 
respectable of all industries. 

In the struggle of financial groups nations have 
been bent to the will of the investors, while govern- 



302 PRIVILEGE THE CAUSE OF WAR 

ments have become the pawns of a ruling class. 
Imperialism is identified with the safety of the state, 
while the people under the plea of patriotism give 
generously of their lives and their property for the 
defense of the privileged classes and the things they 
own. 

Herein is the background of militarism, of the pre- 
paredness, of the wars which have been almost con- 
tinuous since the advent of overseas finance in the 
closing years of the last century: 

(1) The powers of Europe, outside of France and 
England, are still ruled by the feudal aristocracy. 
The people have little real voice in the government. 
Least of all are they consulted as to war. 

(2) Foreign relations are the relations of the aris- 
tocracy. It controls the foreign office and all diplo- 
matic intercourse. Foreign affairs are secret. The 
people are kept in the dark as to their most impor- 
tant affairs. 

(3) The class which rules Europe owns Europe 
much as it did under the feudal regime. The peo- 
ple are still subject; they still pay rent to the over- 
lord; they still pay most of the taxes. Ownership 
and government are still merged as they were in the 
seventeenth century. 

(4) Rents, profits, and surplus wealth have ven- 
tured forth to all the earth in search of dividends. 
The state has followed the investor. It has widened 
its sovereignty at the command of the ruling class. 



PRIVILEGE THE CAUSE OF WAR 303 

Billions of dollars have been so invested. They have 
come in conflict with other billions. The imperial- 
ism of finance has given birth to militarism as a 
means of protecting investments, collecting debts, 
and enforcing contracts. Colossal burdens have 
been heaped on the people for the creation of an 
imperialistic policy that had its origin not in the 
needs of the state, but in the demands of the bank- 
ing and commercial classes. New shibboleths, such 
as "spheres of influence," "protectorates," etc., have 
been coined to identify the private conflict of the 
financier with patriotism, and the worker has been 
sent to the most distant corners of the earth under 
the appeal to protect the flag. 

(5) The trade in war munitions is the ally of the 
investor. It is the apotheosis of capitalism. Loans 
are made to weak countries and warring revolution- 
ists on condition that the money be spent on muni- 
tions. Peaceful peoples are induced to join in the 
competition for battleships, submarines, fortresses, 
and guns. Loans to weak nations are easily forth- 
coming for such purposes. The ultimate results are 
often the destruction of the very liberties for which 
the munitions were purchased. But the conquest 
is by a greater power and one which sanctions its 
depredations by the claims of a superior civilization. 

Lobbies, diplomatic agents, a subsidized press, 
and a close intimacy with the governing classes are 
used to promote the sale of arms. The public mind 



304 PRIVILEGE THE CAUSE OF WAR 

is infected by an appeal to the necessity for pre- 
paredness. Peaceful nations are subjected to war 
scares promoted by the press influenced by the mu- 
nition dealers. Men in high places are drawn into 
compromising positions by being stockholders in 
great corporations which deal with their own govern- 
ment, as are officials of the War and Navy Depart- 
ments, but by reason of their station and the re- 
spectable and patriotic business in which they are 
engaged they are immune from criticism. 

(6) There are great profits from all these sources. 
There are colossal profits from concessions, from the 
floating of foreign loans, from the handling of bil- 
lions of securities. Even in time of war the bankers 
gain. Twenty thousand million dollars of securities 
have been sold in one year to carry on the present 
European war. The banks underwrite the loans or 
subscribe for them in large sums, to be later dis- 
tributed to buyers. The bankers take their com- 
missions on the transactions. They even fix the 
prices at which the bonds shall be sold by the govern- 
ments, as well as the terms of payment and the 
placing of the borrowed money. They handle the 
contracts for the purchase of supplies, for the buy- 
ing of munitions, for the colossal expenditure on 
which the government is committed. 

The munition makers enjoy a harvest. Profits 
which are far above the normal in peace times rise 
to monopoly heights during times of war, as is seen 



PRIVILEGE THE CAUSE OF WAR 305 

in the spectacular fortunes made in Wall Street dur- 
ing the past few months as well as the profit of the 
banks, munition makers, and trading classes in Eu- 
rope. 

(7) The commercial, mercantile, and ship-owning 
classes are identified with the more powerful classes 
of financiers and concession hunters. They saw 
in imperialism new opportunities for trade, for 
markets for surplus products which the low wages 
of the workers made it impossible to dispose of 
at home. They, too, wanted colonies; they, too, 
wanted protectorates that would permit of the 
closed door to the trade of other countries. Out 
of the fears and jealousies of the commercial classes, 
united with the ambitions of the financiers and con- 
cession hunters, conflicts arose that identified the 
mercantile groups with imperialism. The muni- 
tion makers and iron and steel industries of Ger- 
many, alarmed at the proximate exhaustion of their 
iron and coal deposits, ventured forth into Africa, 
Asia Minor, and China. They wanted to build 
railroads to serve trade. They came into conflict 
with England. They carried the National Liberal 
party which, with the Conservative or landed party, 
controls the Reichstag with them. They also car- 
ried the press and the members of the ruling classes 
interested in the munition industry. At the out- 
break of the war the whole commercial world of 
Germany was in a state of irritation and sense of 



306 PRIVILEGE THE CAUSE OF WAR 

balked ambitions that needed only a pretext to 
bring on war. 

During these years of financial penetration and 
overseas expansion the foreign offices of the greater 
powers had lent their assistance to the promotion 
of business interests. They instinctively reflected 
the will of the ruling classes from which the foreign 
secretaries and diplomatic representatives came. 

It is these forces that have converted private 
disputes into war; it is these interests that carried 
400,000,000 people into a conflict in which they 
have little real concern; it is these that have called 
for the sacrifice of millions of men and loaded the 
backs of oncoming generations with burdens that 
involve continuing poverty for unnumbered mil- 
lions as yet unborn. 

These are the unseen causes that lie back of the 
apparent causes of the European war. Just as the 
human mind is a complex of accumulated experi- 
ences that run far back into previous generations, 
and subconsciously influence every action, so twenty 
years of irritations and diplomatic conflict have 
created national psychologies that accepted war as 
the only solution of the issues that had been raised. 

(8) Indirect taxation permits of militarism with- 
out serious burden to the ruling classes. A great 
part of the revenue is wrung from the peasants and 
workers by taxes on food, clothing, and the necessi- 
ties of the people. Indirect taxes on consumption 



PRIVILEGE THE CAUSE OF WAR 307 

are the indispensable allies of militarism, as they are 
of extravagance and irresponsible government. They 
shift the cost onto the poor, onto those in no wise 
responsible for war and in no way benefited by it. 
No single measure would do more to promote peace 
and disarmament than the placing of taxes on 
wealth, incomes, and inheritances, so that the cost 
would be felt directly by the classes that rule in the 
warring nations of the world. 

The Power of Privilege in Domestic Politics. 

To many it will seem an exaggeration to ascribe 
to the activities of high finance the conditions de- 
scribed in the previous chapters. Yet the ex- 
periences of a score of American cities, of many 
American States, the disclosures of the insurance 
companies, the railroads, and banking institutions 
during the past twenty years indicate not only the 
power, but the extent to which privilege will go in 
the accomplishment of its ends. Wherever financial 
privilege has been subject to the search-light of 
publicity a merger of politics and business has been 
disclosed. The merger includes banks and finan- 
cial institutions, public-service corporations, and 
the various businesses which they are able to control. 
It involves the press, the maintenance of publicity 
bureaus, and agencies for accelerating public opin- 
ion. And war and preparations for war are the in- 
ternational expression of the same struggle that has 
convulsed San Francisco, Cleveland, Chicago, Den- 



308 PRIVILEGE THE CAUSE OF WAR 

ver, or Toledo in the conflict of franchise corpora- 
tions to protect their grants from the city; it is an 
expression of the same conflict over the resources 
of Alaska, of the seizure of the public lands of the 
nation, of the financial exploitation of the New 
Haven, the Rock Island, and other railroads. Priv- 
ilege is no more ruthless in its international dealings 
than it is in its domestic activities. 

One explanation of the extent to which privilege 
is willing to go is the impersonal character of its 
dealings. Individual moral responsibility is lost in 
the impersonal corporation. Acts can be committed 
by stockholders and directors with impunity, which 
if committed by individuals would result in im- 
prisonment. Under these conditions perfectly honest 
men have not hesitated to corrupt city councils, 
legislatures, and even the courts; they have made 
use of all of the agencies of government for the 
promotion of their private interests, even when 
such activities involved the overthrow of the gov- 
ernment itself. 

The same merger has come to exist in inter- 
national affairs, in the too intimate relations be- 
tween finance and the foreign office, by which 
financiers have been permitted to become in effect 
the government in its relations with the outside 
world. We cannot possibly know the extent to 
which this is true because foreign activities are 
conducted in secret; they are not even known to 



PRIVILEGE THE CAUSE OF WAR 309 

Congress, to Parliament, or to the Ministry. They 
are shrouded in the mystery which attaches to 
diplomacy. They are lost in the indistinguishable 
confusion of the interests of the nation. We see 
this confusion in every section of the world, wherever 
weak countries have invited the greedy investor. 
And just as the business classes, chambers of com- 
merce, and trade organizations of our cities have 
risen to protest against any regulation or control 
of the public-service corporations and have united 
against such control on the plea that it "hurts 
business/' so we find the same class uniting the 
press, the investing and the ruling classes in the 
jingoistic appeals for armaments, for navalism, for 
a strong foreign policy, and for all of the aggres- 
sions and activities that lead to war. 



CHAPTER XXIV 
WAR AND LABOR 

Whatever may be the gains of the war traders, 
all other classes suffer. They enjoy no profits from 
war or preparations for war. They receive no har- 
vest of extra dividends. No matter where the vic- 
tory falls the people always suffer. They suffer in 
lower wages, in higher costs of living, in burden- 
some taxes. 1 And the poorer the class the greater 
the sacrifice. War demands sacrifice of the people. 
It gives only suffering in return. 

Labor suffers most. Labor bears the cost of war. 
It bears it at the front in the trenches. It bears it 
at home in the suffering of those left behind. Labor 
really gives its all. It gives life; it gives health; 
it gives home, family, and the few comforts which 
labor enjoys. And labor enjoys none of the profits. 

1 While the munition makers in Great Britain doubled their 
profits during the first year of the war, while the bankers main- 
tained their old dividends and added immense sums to reserves, 
while the ship owners increased freight rates from 500 to 600 per 
cent., and freight rates on foodstuffs went up from 10 shillings 
per ton in 1914 to 75 shillings per ton in 1915, while coal was ad- 
vanced to prohibitive prices by the operators, the working classes 
were asked in the name of patriotism to continue their old scale 
of wages in the face of the fact that flour rose 50 per cent., bread 
40 per cent., sugar 68 per cent., and meat from 40 to 50 per cent. 
War created fabulous profits for the trading and financial classes; 
it cut the wages of the workers from one-fourth to one-third by 
reason of the monopoly charges and the high cost of living which 
the war entailed. 

310 



WAR AND LABOR 311 

And for generations after the war labor continues 
to pay the cost in taxation charges. For war loans 
are never paid. The loans of the present war can- 
not be paid. And the cost of future armaments will 
increase the burden still further. Income and in- 
heritance taxes will be used far more extensively than 
in the past, but they are far less oppressive than those 
which fall upon consumption, and the ruling classes 
see to it that taxes upon wealth are among the first 
to be reduced or repealed. 

Defeat means revenge. Revenge means more 
militarism, for the wounds of defeat can only be 
healed by more killings. The talent of the state 
is dedicated to waste. Inventive genius is devoted 
to the making of engines of destruction. Progress 
halts, and privilege, toryism, and reaction identify 
the safety of the state with the continuance of the 
old abuses in which they are interested. 
War and Reaction. 

Labor suffers still further. War means reaction. 
It sets back the world. It means a check to social 
legislation. There is no money for social needs; 
no time for humane proposals. "Experience has 
taught," says Mr. J. Ramsay Macdonald, "that the 
democratic movement is confused, broken, and sub- 
verted when the national safety is threatened and 
when the emotions let loose by war surge up in 
the minds of the people. It also teaches us that 
when the war is over not only is exhaustion upon 



312 WAR AND LABOR 

the people, not only have they to gather themselves 
together and pick up broken threads, all of which 
means waste of time and ineffectiveness of action, 
but that during the war the reactionary interests 
have added to their influence and power, and that 
the thoughts of force and hatred of a foreign enemy, 
which were natural while the war lasted, have shat- 
tered the foundation of the democratic mind and 
entangled the highways of democratic advance." 1 

This is the verdict of history. "Harriet Mar- 
tineau," he says, "in a very early page of her History 
of Peace, tells how before the war with Napoleon 
broke out it was 'an edifying sight ... to see the 
prime minister of England, Mr. Pitt, bringing 
forward the subject of Parliamentary Reform. . . . 
Thus liberal and popular were the ideas of the great 
statesman up to 1785.' But as the result of the 
war, 'he became one of the despots of Europe — 
in point of despotism, one of the foremost.' 

"The French Revolution and the Napoleonic Wars 
took half a century out of the life of British democ- 
racy and threw it back upon futile extravagances 
and peculiarly minded coteries of idealist or angry 
reformers. The Crimean War delayed reform, 
smashed Mr. Gladstone's great financial schemes 
of 1853, and secured for the reaction a fresh lease 
of life in its struggle against Radicalism." 2 

1 War and the Workers, p. 2; Union of Democratic Control. London. 

2 Idem. 



WAR AND LABOR 313 

Reaction is the order of the day in all of the war- 
ring countries. In Russia the rights of the Finnish 
people and the liberties of the Duma were sup- 
pressed at the outbreak of the war. Democratic 
France returned to a quasi-military government in 
spite of the fact that there are Socialists in the 
cabinet, while the Liberal government in Great Brit- 
ain assumed powers under the defense of the realm 
act which were described by Lord Halsbury in these 
words: "Undoubtedly it is about the most uncon- 
stitutional thing that has happened to the coun- 
try." 

As Mr. Macdonald says: "The martial music 
to which the common people beat time is generally 
the funeral march of their immediate hopes." 

The Effect of the Civil War, 

War always intrenches privilege in the councils 
of the nation. The power of the financier is in- 
creased. He is called in to rule. Otherwise the 
state would not go on. Such was our own experi- 
ence as a result of the Civil War. Prior to 1861 a 
democratic spirit prevailed in the nation. Slavery 
was the only privilege. Economy was the note in 
government expenditures. A low tariff sufficed for 
all of our needs. The Civil War ushered in a new 
era. New classes and new interests became as- 
cendant in the government. The need for revenue 
brought about a merger of the protected interests 
of Pennsylvania and New England and the banking 



314 WAR AND LABOR 

interests of Wall Street with the Treasury Depart- 
ment, a merger which has continued ever since. 
Corruption born of army contracts and war profits 
penetrated into Congress and the various depart- 
ments of the government. The public domain of 
the West was squandered in land grants to the Pa- 
cific Railroads with no concern for posterity. The 
richest resources of the nation were given away. 
For years after the war privilege was ascendant and 
democracy reached the lowest ebb in our history. 
Taxes were collected not for the needs of the govern- 
ment, but to maintain a protectionist policy. Rev- 
enues were squandered and pork-barrel methods 
prevailed. Pensions were recklessly granted to 
prevent a treasury surplus, while appropriations for 
rivers and harbors, for public buildings, and other 
purposes became the recognized practice of con- 
gressional procedure. 

For fifty years the reactionary influences which 
gained a foothold during the Civil War maintained 
their control of the government. This was the most 
costly price of the Civil War, far more costly than 
the indebtedness incurred or the economic waste 
involved. Only within the last few years has democ- 
racy begun to reassert itself in the effort to bring 
back the nation to its earlier ideals. 

Herein is the gravest danger of the proposed 
preparedness. It diverts attention from social legis- 
lation and centres it upon militarism, the army and 



WAR AND LABOR 315 

the navy, on overseas complications and imperial- 
ism. Already the democratic gains of recent years 
have been submerged. Congress and the public 
mind are absorbed with other questions. There is 
no place for a peace programme, for abating the 
abuses of privilege, or for consideration of the pro- 
posals of democracy. 



CHAPTER XXV 

THE ISSUE THAT CONFRONTS US 

Certain forces have been set in motion by the 
European war whose coincident appearance seems 
hardly a matter of accident. These forces are: 

1. The billion-dollar war orders that have filled 
every available shop and factory with the most 
profitable orders they have received in years. 

2. The agitation for preparedness involving the 
expenditure of billions of dollars for an increased 
army and a navy equal to that of the strongest 
European power. 

3. The promotion of powerful financial organiza- 
tions for foreign exploitation and overseas finan- 
cing. 

These, as we have seen, are the forces of imperial- 
ism. Colossal profits in munitions, the agitation for 
a great navy, and the organization of overseas trad- 
ing corporations were so simultaneous in their ap- 
pearance as to suggest cause and effect, especially 
as the classes most active in promoting preparedness 
include the leading stockholders in the new pro- 
motion corporation, the munition factories, and 
banking institutions which are reaping such colossal 
profits from the present European war. 

316 



THE ISSUE THAT CONFRONTS US 317 

Here is the same merger of interests, here is the 
same "invisible government" which for the past 
twenty years has been waging war on democracy. 
It is the merger responsible for insurance scandals, 
the railway bankruptcies, the Alaska land frauds, 
and the] monopolization of industry that menaces 
our life and our institutions. It is an old enemy 
in new clothes. It is the same merger that for 
thirty years has involved the greater powers of 
Europe in war and preparation for war. 

The Munition Makers and Their Profits. 

Since the outbreak of the war, European war 
orders have been placed with American firms in ex- 
cess of $1,000,000,000. The profits on these orders 
are colossal. War securities have advanced in price 
on the stock exchange by nearly $1,000,000,000. 
That much has been added to the wealth of a 
small number of persons who hold the controlling 
interest in the greater companies which have the im- 
portant war contracts. The banking firms of Wall 
Street have been the financial agents of the Allied 
powers in the handling of these contracts. They 
have floated the $500,000,000 Allied loan and 
carried through all of the transactions for the Allied 
governments since the outbreak of the war. The 
largest war orders have been placed with the Beth- 
lehem Steel, Midvale Steel, General Electric, du 
Pont Powder, Westinghouse Electric, and Ameri- 
can Locomotive Companies, all closely identified 



318 THE ISSUE THAT CONFRONTS US 

with Wall Street interests. Hundreds of millions 
of orders have gone to lesser companies. 

Before the war Bethlehem Steel fluctuated around 
$40 a share. It has since sold as high as $600 a 
share. Under the stimulus of war orders Savage 
Arms rose to $340 a share, du Pont Powder to $422, 
Colts Arms to $840, and Winchester Repeating 
Arms to $2,400 a share. 

One of the results of the war has been to identify 
the financial powers with the munition makers as in 
the warring nations of Europe. 

Coincident with the advance in the value of war 
stocks, the cry of unpreparedness was raised against 
an unnamed power that threatened us. The cry 
sprang as if from the earth. It was born with the 
formation of various leagues for its promotion whose 
officers and promoters are closely identified with the 
great banking-houses and munition makers of the 
East. The press echoed the hue and cry. The 
navy, which prior to the war was said to be second 
only to that of Great Britain, is now said to be 
that of a third or fourth rate power. The army is 
a paper army. Our coast defenses will not with- 
stand an attack. Any one of the great powers 
could land an army on our shores and bring us to 
our knees in a few weeks' time, and 100,000,000 
people separated from these powers by 3,000 miles 
of sea would be powerless to prevent it. 

We must have a navy equal to that of the greatest 



THE ISSUE THAT CONFRONTS US 319 

power on earth, is the demand. Even that seems 
far from adequate to some. Hundreds of millions 
must be immediately spent. There must be a large 
standing army, some say of 400,000, others of 1,000,- 
000 men. Universal conscription is insisted on by 
some. The whole nation must devote itself to pre- 
paring for an invasion, no one knows from where, 
and no one knows quite how it will come. 

The fact that Europe is prostrate with an in- 
debtedness fast approaching $75,000,000,000, that 
from 8,000,000 to 10,000,000 people have been 
killed or incapacitated, that the end of the war 
seems as far off as ever, and that all Europe is so sick 
of war that a revolution would probably be the re- 
sult of further aggression, is only another reason 
for still further preparedness. 

No device of the munition makers of Europe for 
awakening fear, in the promotion of war scares, in 
the agitation to "scrap" existing armaments, in 
the lobbies and press control is wanting in the cam- 
paign that has been systematically carried on for 
the last few months. Every attack on the alleged 
weakness of the army and navy can be duplicated in 
the disclosures of the tactics of the war traders of 
England and Germany. Line by line and paragraph 
by paragraph the stories of the Krupps and Maxims, 
the ship-builders and the munition makers of Ger- 
many, England, and France have been copied by 
our scare-makers. The bankers and the munition 



320 THE ISSUE THAT CONFRONTS US 

makers augment the hue and cry. Only a handful 
of congressmen have exposed the activities of the 
munition makers and their practices in this and 
other countries; they have shown the international 
monopoly which exists, the colossal profits enjoyed, 
and the gains to be expected from the thousands of 
millions to be spent on the army-and-navy pro- 
gramme of the next few years. 

Is the preparedness urged by the merger of 
high finance and the munition makers only another 
device of the privileged interest to secure an in- 
dorsement by the government on the back of $1,000- 
000,000 of paper securities by providing war orders 
for the munition plants after the war? 

The Birth of Financial Imperialism. 

The second element in the programme is the or- 
ganization of forces for the promotion of overseas 
finance under the guise of promotion of trade. The 
first expression of the movement is the organiza- 
tion of a gigantic $50,000,000 international cor- 
poration organized and financed by interests closely 
identified with the munition firms and the financing 
of the present war. This organization, as its pro- 
moters announce, is for the purpose of enabling 
the United States to take a larger part than here- 
tofore in the industrial development of other coun- 
tries where capital is needed. 

Such countries are certainly not Great Britain, 
France, and Germany — the great investing nations 



THE ISSUE THAT CONFRONTS US 321 

of Europe. The countries where " capital is needed " 
are the weak and helpless peoples of Mexico, Cen- 
tral and South America, of Morocco, Tunis, Persia, 
Africa, China, and the insular possessions of the 
United States, and elsewhere. 

"Wealth is accumulating," so the announcement 
of the first corporation reads, "so rapidly that a 
portion of it can be spared for investment abroad. 
The experience which our people have had in large- 
scale production and in extensive construction 
work has especially fitted us to carry on develop- 
ment work in other countries." 

"Surplus wealth" lured Great Britain into Egypt. 
The English financiers made a loan to the Khedive 
in 1873 of $410,000,000. They gave the Khedive 
only $105,000,000, and kept $305,000,000 as secur- 
ity. " Surplus wealth " bankrupted that country. It 
destroyed Egyptian independence; it was followed 
by intervention and the bombardment of Alexan- 
dria to protect the loan. This was the beginning of 
financial imperialism thirty-four years ago. 

"Surplus wealth" led France into Morocco. In 
six years' time the indebtedness of the Sultan to the 
European financiers was increased from $4,000,000 
to $32,500,000. The Sultan received but a small 
part of the loan. He went bankrupt. He could 
only pay the interest by wringing it from the 
wretched natives who finally revolted. France 
intervened at the demand of the bankers. Thou- 



322 THE ISSUE THAT CONFRONTS US 

sands of Moors were slain. Germany sent a gun- 
boat to protest. Europe was on the verge of war 
in 1911 as a result of this conflict. The Morocco 
incident is one of the hidden causes of the present 
European war. 

"Surplus capital" lured Germany into Turkey. 
There were railroads, mines, docks, harbors, and 
trading concessions waiting to be exploited. The 
banks earned $25,000,000 commissions in building 
the Bagdad Railway, and besides saved $45,000,000 
more in the cost of construction; all of which was 
charged to the Turkish Government. The banker 
was followed by the Kaiser and his armies. Turkey 
has lost her independence; the Balkan states have 
been embroiled, and Europe is now warring over 
the conflicting interests of England, Germany, and 
Russia in Turkey. 

"Surplus capital" negotiated the six-power loan 
to China. The loan was accompanied by demands 
by the bankers for control of the internal adminis- 
tration and revenue system of China. It struck at 
her very life, and China declined the terms. Presi- 
dent Wilson lifted American diplomacy into its 
proper place when he refused to give his sanction 
to the participation of American bankers in the 
loan. He ended dollar diplomacy so far as we are 
concerned. But the same bankers are now loudly 
clamoring for a return to the dollar diplomacy of a 
former administration. 



THE ISSUE THAT CONFRONTS US 323 

"Surplus wealth" aided in strangling Persia. It 
ended the independence of Tunis. The Italian War 
against Tripoli had its motive, in part at least, in 
the speculations of the Bank of Rome. 

"Surplus wealth" for foreign investment drained 
France of capital needed for internal development. 
It weakened her in her war with Germany. 

It was "surplus wealth" invested in South Africa 
that brought on the Boer War. "Surplus wealth" 
led to the spoliation of Mexico, the taking of her 
lands, mines, oil-wells, and the richest portions of 
the country. 

Dollar diplomacy, navalism, and the exploitation 
of weaker peoples, ending finally in the European 
cataclysm, have gone hand in hand during the last 
twenty years. The darkest pages of this story will 
never be written, for the records lie buried in the 
graves of weak and defenseless peoples in every part 
of Africa, in Asia, in Turkey, Persia, Asia Minor, 
and the Balkans; it is a story that would have been 
written in the subjugation of Mexico, in Central and 
South America, had not the Monroe Doctrine in- 
tervened. 

We should be slow to accept the statement that 
this is a movement for the promotion of foreign 
trade, as the organizers of these corporations de- 
clare, and as patriotic business men have been led 
to believe. As has been seen, none of the countries 
of Europe have materially advanced their trade and 



324 THE ISSUE THAT CONFRONTS US 

commerce by the organization of banking institu- 
tions for that alleged purpose. Rather the foreign 
banking agencies of the great powers are engaged, 
almost to the exclusion of everything else, in obtain- 
ing concessions, building railroads, securing mining 
land and oil grants, in the making of loans to weaker 
powers, and in co-operating in the sale of munitions. 
And an examination of the interests of the banking 
institutions that are promoting the new corporation 
shows that their relations are not in the field of 
manufacturing, trade, and commerce at all. They 
are in the field of monopoly, finance, and speculation. 

Giving Overseas Expansion a Patriotic Sanction. 

As happened in Europe, it is necessary to give a 
patriotic sanction to financial imperialism to identify 
the nation with its programme. Wall Street can 
easily finance a dozen $50,000,000 corporations. 
But that would leave them Wall Street corpora- 
tions. The flag would not willingly follow their 
investments; the nation would not be a com- 
placent collection agency for such questionable 
claimants; so the new international corporation is 
to include as many other interests as possible. Such 
strength is needed, the announcement says, as can 
only be found by arousing the interest and securing 
the co-operation of the entire country. It is neces- 
sary to make it a national undertaking and appeal 
to the confidence, enterprise, and patriotism of the 
American people. 



THE ISSUE THAT CONFRONTS US 325 

No element is lacking in this new imperialism of 
finance, which under the glamour of patriotism, aims 
to exalt America to the dignity of Great Britain, 
Germany, Russia, and France as a world "power." 
Line by line the history of the exploitation of de- 
fenseless people is foreshadowed in the programme 
that privilege would have us enter upon. High 
finance, the making of munitions at colossal profits, 
overseas exploitation, dollar diplomacy, and a 
great navy ready and willing to demand the open 
or the closed door as the immediate advantage 
may dictate, these are the elements of financial 
imperialism that have brought Europe to its pres- 
ent end. The logic is inexorable, the results are 
inevitable. Every nation of Europe that armed 
for defense has used its preparation for offense. 
The record of "preparedness for defense" is written 
all over the map of Africa, it is written in Turkey, 
Asia Minor, Persia, Manchuria, and China. It is 
written in the blood of millions of men in the pres- 
ent European war. 

Only the chance election of a President might 
determine the uses to which this preparedness would 
be put, with the power of high finance, the control 
of the press, and the invisible powers of privilege 
ready at a moment's notice to urge the unleashing 
of guns in the name of "dignity" and "national 
honor." 

This is the programme of preparedness offered by 



326" THE ISSUE THAT CONFRONTS US 

those who have monopolized the railroads and 
public-service corporations, who have seized the 
iron-ore, coal, and copper deposits of the nation, who 
have enclosed the public domain and laid their hands 
upon the banks and credit resources of the nation, 
and who, having exploited prostrate America, are 
now turning wistful eyes to the virgin opportunities 
of weak and defenseless peoples in other parts of 
the world. 

It is these that are most active in urging a colossal 
naval programme and a large standing army. They 
assail the President and Congress for the inadequacy 
of their defense programmes, and attack any one as 
unpatriotic who questions their demands. Yet these 
same classes are unwilling to bear their share of the 
cost of preparedness; they cry confiscation when 
taxes are suggested on the things they own no 
heavier than England and Germany were carrying 
in times of peace. They suggest that the cost 
should be borne by a higher tariff and by indirect 
taxes on the things the peoples consume. They 
even meet proposals for the manufacture of armor- 
plate by the government by the threat that they 
will increase the cost of that commodity by $200 a 
ton. This is the answer of privilege to the demand 
that preparations for war should involve equal 
sacrifice. 

Democracy has a right to insist that preparedness 
is not merely a demand for private profit; that an 



THE ISSUE THAT CONFRONTS US 327 

increased navy is not designed as an agency for the 
promotion of overseas finance, and that militarism 
shall not be the grave of the things we hold most 
dear. 



CHAPTER XXVI 

THE POSSIBILITY OF WORLD PEACE 

There can be no peace until we have a common 
factor of interest in peace. It may be the common 
factor of self-interest to the financiers and ruling 
classes or it may be the common factor of democ- 
racy. High finance may find that war is so costly 
that it cannot be longer afforded. It may find a 
cheaper way to insure concessions and protect its 
investments than by armaments. High finance may 
partition the world as it has partitioned parts of 
China; it may determine upon a common tribunal 
to which all of the concession seekers, investors, and 
privileged interests will consent to submit their 
claims. And this may be one of the results of the 
war. Tribunals may be established and accepted 
by all nations and countries seeking financial sup- 
port for their development and the dominant powers 
may be glad of such an escape from the burdens 
which competition for naval preparedness has 
thrown upon their countries. This is a possible 
means of escape from the increased armaments 
which will otherwise follow the present war. 

Constructive Proposals. 

Two proposals along these lines have been made 
for the solution of the conflicts which arise over 

328 



THE POSSIBILITY OF WORLD PEACE 329 

concessions and overseas finance. They are both 
predicated on the assumption that private inter- 
national finance must continue and that the na- 
tions of Europe will lend their support to the claims 
of their subjects in distant parts. These proposals 
are: 

One, a suggestion by Mr. H. N. Brailsford that 
there be imposed on the groups of competing na- 
tional concession hunters in each area the duty of 
amalgamating in a permanent international syn- 
dicate for the development and exploitation of 
that territory, such syndicate to control all of the 
railroad, mining, and other concessions in the terri- 
tory. 1 

Two, the suggestion by Mr. Walter Lippmann 
that a permanent European senate be created to 
which would be submitted grievances, and to which 
colonial officials would report. The senate should 
have its own representatives in dependent coun- 
tries who would render disinterested reports on 
questions as they arise. It would be a kind of upper 
house to the local legislative assembly with power 
to hold it responsible. The allegiance of conces- 
sionaires, financiers, and merchants should be turned 
from their own governments to this senate which 
would serve as a tribunal for the settlement of dis- 
putes without the aid of the foreign office and the 
navy. 2 

1 The New Republic, May 8, 1915. 

2 The Stakes of Diplomacy, chap. EX. 



330 THE POSSIBILITY OF WORLD PEACE 

Both of these proposals have precedents to sup- 
port them. The financiers are familiar with a 
division of territory, with the closed door, with in- 
ternational syndicates for the exploitation of weaker 
peoples. They are accustomed to the idea of tribu- 
nals for the arbitrament of disputes growing out of 
industrial and financial conflicts. Such was the 
Algeciras Conference over Morocco, the Convention 
between Russia and England over Persia, the six- 
power-loan agreement as to China. But the ac- 
ceptance of such a solution will depend upon the 
question of whether interests within the state are 
stronger than the state itself and whether those 
interests see in peace greater economic advantages 
than are to be obtained from preparations for war 
and the anarchy of conflict which now prevails. 

This is the serious obstacle to these proposals in 
so far as they look to disarmament. For the con- 
cessionaires are also the financiers at home. Their 
profits from war and preparations for war are colos- 
sal. They are of many different kinds. And they 
ramify in so many directions and affect so many in- 
terests that they create a psychology that does not 
readily accept proposals for permanent peace. The 
financiers are closely interlocked with the muni- 
tion makers. They are equally interested in the 
ship-building firms which build battleships. They 
market the securities and handle the loans. They 
are the contractors for the government. One needs 



THE POSSIBILITY OF WORLD PEACE 331 

only to contemplate the change which came over 
the mind of America after the war orders had opened 
the Stock Exchange and converted a depression into 
a harvest of easy profits to realize how difficult it is 
to expect the financial powers to unite on a pro- 
gramme for peace or the munition makers to be 
enthusiastic over plans for disarmament. The 
whole psychology of the ruling classes is unrespon- 
sive to such a proposal. 

The Impersonality of Finance. 

In suggesting that the financial classes are in- 
fluenced by such calculating and mercenary mo- 
tives, it is not necessary to assume that they are 
any less humane than any other people or that they 
are any less honest in their personal dealings. But 
in modern business it is not the individual that 
acts, it is not the stockholders, it is not the in- 
dividual director or president of a corporation. 
Rather it is a composite psychology of many men 
seeking to make profits out of business that creates 
conditions. And when financiers act they act as a 
class in which all individual or personal respon- 
sibility-is merged in the impersonality of a group 
of corporations all related to one another and all 
bound by an implied trust or obligation to make 
as much money as possible. And it is doubtful if 
the experiences of this war are such as to impel the 
financial classes to promote or even lend their in- 
fluence to the establishment of tribunals or courts 



332 THE POSSIBILITY OF WORLD PEACE 

for the arbitrament of the disputes of their coun- 
tries. Moreover, when the war is over the finan- 
cial classes will be so intrenched with the govern- 
ments of Europe as to be almost indistinguishably 
merged with them. Self-interest, far from urging 
the ruling and investing classes to seek means for 
the peaceful arbitrament of overseas conflicts will 
rather impel them to the continuance of the old 
order, unless the burdens of taxation upon incomes 
and inheritances are so nearly confiscatory that they 
will be driven to peace tribunals as a means of escape 
from bankruptcy. And the prostrate condition of 
the landed and ruling classes of Great Britain, Ger- 
many, Austria, and Russia may be such an impelling 
force that it will overcome any disinclination on the 
part of the financial institutions toward permanent 
peace, for in these countries the financial houses are 
the representatives of the ruling classes. 

This is one of the hopeful signs on the horizon. 
Income taxes in Great Britain have risen to 33 per 
cent, on large incomes and promise to go higher. 
Taxes on wealth and inheritances in other coun- 
tries will be equally high. From this there is no 
escape, for the tax burdens of Europe have been 
increased to nearly $3,000,000,000 already, merely 
to meet the carrying charges on the new indebted- 
ness created. When the war is over the total taxes 
will probably be double what they were at the out- 
break. They will amount to from $10,000,000,000 



THE POSSIBILITY OF WORLD PEACE 333 

to $12,000,000,000 a year or an average of from 
$125 to $150 a family. They will consume from 
one-fourth to one-third of the total annual produc- 
tion of the warring powers. 

Here is a potential force to bring about peace. 
The burden of taxation may lead to permanent or 
temporary repudiation of the interest as a means 
of enabling the countries to get to their feet again. 
It may lead to revolutions or democratic uprising 
that once started will spread all over Europe. It 
may lead to heavier taxation on the rich and priv- 
ileged classes, to the taxation of the old feudal 
estates and their breaking up for peasant proprietors, 
it may lead to such an impoverishment of the na- 
tions that they will be unable to regain their former 
positions for many years to come. Any one of these 
contingencies might tend in the direction of peace; 
they might lead the ruling classes to seek some res- 
pite from the burdens of armaments and militarism 
and the abandonment of universal military service 
as a means of rebuilding the trade and industry of 
the country. The financial burdens of the war may 
be such that the privileged interests will of them- 
selves turn from the sword to the ploughshare as a 
means and the only means of escape from personal 
bankruptcy and national insolvency. 

The Mediterranean and the Trading Privileges. 

Other economic interests are at war in addition 
to the financier and concession seeker. These in- 



334 THE POSSIBILITY OF WORLD PEACE 

terests are even more closely identified with the 
security of empire than are the claims of high 
finance. The nations whose interests are most in 
conflict are Great Britain, Germany, and Russia. 
The economic clash is primarily between Germany 
and Great Britain. And the interests of these two 
countries seem irreconcilable. They go to the very 
heart of their position and power. They are deep- 
rooted in the commercial and financial life of these 
nations. 

They involve not only a struggle of concession- 
aires and financiers, but of commerce and trade in. 
every quarter of the globe. Freedom of trade and 
freedom of the seas are involved in this irreconcilable 
conflict. There are preferential tariffs in the colonies 
and the closed door of dependencies. England in- 
sists on maintaining the status quo under which she 
enjoys a controlling place in the trade routes of the 
world. The Mediterranean is in effect a British 
sea, commanded at Gibraltar and Egypt by Eng- 
land's possession of these two strategic points. 
The building of the Bagdad Railway is a menace 
to this control as well as the shipping and overseas 
trade of the British Empire. This new rail route 
threatens not only the life-cord of the British Em- 
pire; it strikes at the underpinning of the entire 
British financial world. If Germany completes her 
drive to the East, it will involve a financial and in- 
dustrial revolution in Great Britain comparable to 



THE POSSIBILITY OF WORLD PEACE 335 

the decay which set in in the Mediterranean cities 
with the opening of land routes to the Atlantic sea- 
ports in the later Middle Ages. 

It is impossible to overstate this danger. The 
Bagdad Railway threatens to unsettle the financial, 
industrial, and mercantile foundations of Great 
Britain just as it will imperil the life of the empire. 
For the Bagdad Railway means a direct, cheap, and 
rapid means of communication from Germany and 
all of Europe into the Mediterranean, into Turkey, 
Asia Minor, Persia, the east coast of Africa, China, 
India, and all of the islands of the Pacific. It means 
an end of the potential power which Great Brit- 
ain enjoys by reason of her control of the Mediter- 
ranean... More than this, England's place and power 
are largely dependent on the fact that she is the 
clearing-house of the world. Every spot on the 
globe clears its products through her ports. It is 
easily conceivable that with Hamburg, Bremen, 
and Lubeck as free ports in the North Sea, and 
with Constantinople and the Persian Gulf connected 
with these ports by rail, the supremacy which Eng- 
land enjoys in this respect might be impaired as 
well. 

Here is something very like an impasse. The 
German drive to the East is a far greater menace 
to England than Russia has ever been. It means 
the rise of Germany to the place of commanding 
power not only in Europe, but in the Near and Far 



336 THE POSSIBILITY OF WORLD PEACE 

East as well. Every one admits that the Bagdad 
Railway should be built. It will mean the ultimate 
development of a new civilization in Asia Minor, 
Mesopotamia, in Syria and the Euphrates valley, 
of a new empire of tremendous potentialities to 
the civilization of the future. But it means a sword 
of Damocles over the British Empire. 

In this struggle between Germany and England 
all of the financial, commercial, mercantile, and 
trading classes are involved as is the merchant 
marine of the two countries. 

A similar impasse exists between Russia and 
whichever power controls Constantinople and the 
Bosporus. The industrial life of Russia is depen- 
dent on the marketing of her surplus wheat. Her 
wheat exports pay the interest on her debt. They 
finance her imports. Her only open outlet is to 
the arctic seas, where the ports are closed for a part 
of the year. 

Russia like Germany has dreams of empire to 
the south. They come into conflict with Great 
Britain in Persia and with Turkey at Constan- 
tinople. Here again is another seemingly irrecon- 
cilable warfare of interest which a solution of the 
conflicts of the financiers does not remove. And 
these conflicts of Germany, England, and Russia 
are all so identified with the life of these coun- 
tries that any concession by either power involves 
the abandonment of imperial pretensions as well 



THE POSSIBILITY OF WORLD PEACE 337 

as industrial and commercial advantages. Claims 
arising over these conflicts are not justiciable. They 
cannot be submitted to Hague tribunals. 

These conflicts about the Mediterranean are 
among the most difficult problems which the war 
presents. It would seem that they will only be 
settled by occupation and force. They may delay 
the duration of the war far longer than would the 
purely European questions. For only exhaustion 
will induce Germany to abandon the contest for 
which she has so long been preparing, while Great 
Britain and Russia can only permit German suprem- 
acy in Turkey and Asia Minor as an admission of 
the beginning of the end of empire or the final de- 
feat of the ambitions of centuries. 

Only a big-visioned generosity can settle these 
questions. It must be the generosity of democracy, 
and a determination to forever end the embroilment 
of whole peoples in the conflicts of classes. There 
is only one rule to apply, and that is freedom, free- 
dom of each nation to expand without let or hin- 
drance from any other nation; equal freedom in 
colonial markets and freedom of the seas. The 
merchant marine of warring nations should be freed 
from seizure or attack; the strategic places of the 
earth should be internationalized, and the sovereignty 
of a nation should end with its own boundaries and 
those of its colonies. It should not be at the com- 
mand of the trading and financial class. Only by 



338 THE POSSIBILITY OF WORLD PEACE 

setting up a new ensign, a new standard in which 
the wider interests of the world will supersede the 
narrow interests of a class or a nation will the world 
be freed from the wars and preparations for war 
which have engulfed it. 



CHAPTER XXVII 
DEMOCRACY AND THE ROAD TO PEACE 

World arbitration, international tribunals, mu- 
tual understandings are impossible so long as forces 
within the state are stronger than the state. There 
can be no peace between democracy and Junker- 
ism, whether Junkerism be that of Prussia, Aus- 
tria, Russia, Great Britain, or the United States, 
any more than there can be peace between the lion 
and the lamb. Nor can there be a meeting of the 
minds between states that are democratic and 
those that are still ruled by the feudal classes. 
They do not want the same things. They do not 
think in the same terms, they speak a different 
language, they have a different psychology, they 
have a different conception of the state. One sees 
this in the political struggle in this country. Priv- 
ilege thinks as did the Bourbons, as did the Stuarts, 
as do the Hohenzollerns, the Hapsburgs, the Roman- 
offs. Privilege thinks of people as raw material for 
guns in time of war, for factories in time of peace. 
This is the psychology of privilege, whether it be 
in dynastic Europe or in America. 

Privilege views the state as its agent; it uses it 
for hunger tariffs, for unjust taxation, for monop- 

339 



340 DEMOCRACY AND THE ROAD TO PEACE 

oly, for preparations for war, for war itself. And 
there can be no meetings of the minds between 
those countries that are ruled by privilege and 
those that are ruled by the people. That is why 
there is no concert of nations; that is why the 
Hague tribunal is a chimera. Privilege and democ- 
racy cannot unite on a peace programme, they 
cannot join in a peace conference because privilege 
and democracy have conceptions of the state that 
are forever at war. 

Peace is the problem of democracy. Peace is 
the first great cause of labor. It overshadows al- 
most every other cause. Permanent, lasting peace 
will only come through democracy, and democracy 
can only come with an end of war. Other classes, 
other forms of government are by instinct and in- 
terest against peace. For war is of the very life 
of privilege, whether it be the privilege of property 
or the privilege of blood. 

Democracy not only in Europe but in America is 
the first step toward peace, and no permanent peace 
is possible so long as the privileged classes rule. It 
is privilege which rejects arbitration, a concert of 
powers, the establishment of peace tribunals. For 
privilege is interested in all the political, financial, 
and industrial profits of war and preparedness for 
war. 

Labor, on the other hand, is at war with war. 
Labor acquires no conquered land. It enjoys no war 



DEMOCRACY AND THE ROAD TO PEACE 341 

profits. It receives no increase in pay. It shares in 
no spoils. Labor pays to-day. It pays in posterity. 
And the peace of the future lies in the hands of 
labor, in the hands of democracy. For the cause 
of labor and the cause of democracy are one. 

Is peace secure with democracy ? Not absolutely. 
Yet the peaceful nations are the democratic nations. 
They are not aggressive. They welcome peace and 
disarmament proposals. They challenge secret 
diplomacy and financial conquest. Their govern- 
ments are under a powerful check from public 
opinion. France, Denmark, Holland, Scandinavia, 
Switzerland are the nations of peace. They are 
militaristic only for actual defense. And were there 
universal democracy the way would be open for 
peace tribunals, for arbitration, for disarmament, 
and the arbitrament of international questions by 
peaceful means. 

But even without universal democracy measures 
can be taken to identify all classes with a desire 
for peace. This is particularly true in the United 
States, where the danger of war is distant and mili- 
tarism is not yet ascendant as it is in Europe. We 
should strike at the privileges, profits, and immuni- 
ties which the ruling classes enjoy. If we end profit 
from war and preparations for war, if we democ- 
ratize all of the agencies of foreign relations, so that 
they may not be used by privileged interests, then 



342 DEMOCRACY AND THE ROAD TO PEACE 

we shall strike at the very foundations of privilege 
and shall tend to identify all classes with proposals 
for peace. 

In the days of peace every precaution should be 
taken to insure that there are no forces making for 
war. Just as we now forbid the trafficking in cer- 
tain drugs, in the sale of poisons, just as we forbid 
the making of any imprint that suggests a coin or 
currency, just as experience has demonstrated that 
men may not make profit out of certain things be- 
cause of the danger of abuse, so in the gravest of 
all dangers laws should be passed taking from those 
who might gain from war or preparations for war 
every hope that advantage could come to them by 
such a calamity. 

War should be made as difficult as possible. Now 
it is so easy. Fear is quickly aroused, national 
honor and offended dignity can be so easily played 
upon. Not alone the privileged classes, but Presi- 
dents, ministries, parliaments are all easily mobilized 
for war by the hue and cry of the press and the 
fear of public opinion. The army and navy can 
be so easily called into action for the defense of 
lives and property, to resent some indignity to the 
nation, to present a bold front as a means of in- 
dicating preparedness. All of the powers of war 
are ready to be unleashed at a moment's notice just 
as they were in Europe in the twenty-four hours 
that sent six great powers to the battle-field for 



DEMOCRACY AND THE ROAD TO PEACE 343 

reasons that had not been explained to the people 
and as to the propriety of which they had no right, 
according to the traditions of politics, to be con- 
sulted. 

It is only through an abandonment of the idea 
that those intrusted with power have an exclusive 
right to decide upon war, and the substitution of 
a public opinion equipped with all the facts and 
taken into the confidence of the ruling classes, that 
peace can be assured to the world. And only when 
war is not hovering on the horizon can precautions 
be taken that will insure the conditions that make 
for peace. 

Among such measures of precaution, such guaran- 
tees of peace, are the following: 

i. Democratize Foreign Affairs and End Secret Diplo- 
macy. 

Every obstacle should be placed in the way of 
easy war, of strained relations, of misunderstand- 
ings and the diplomatic irritations that form the 
prelude to war. 

The making of war should be taken from foreign 
secretaries, Presidents, cabinets, parliaments, and 
congresses. War involves colossal financial bur- 
dens. It involves the offering of human life as well. 
And the responsibility for such sacrifices cannot 
with safety be delegated. It must be judged by 
each individual man and by each individual woman 
as well. The making of war should be lodged with 



344 DEMOCRACY AND THE ROAD TO PEACE 

the people. And they should know all the facts. 
There should be as many obstacles to a declaration 
of war as possible. 

The foreign service should be democratized. For- 
eign affairs should be conducted in the open. The 
relations of the State Department should be dis- 
cussed in public rather than behind closed doors 
of executive sessions. A people have a right to 
know of their engagements to other powers, cer- 
tainly when those engagements may lead them into 
war. There should be no suspicion of hidden en- 
gagements or financial influences in the foreign 
office. 

The diplomatic service should be placed on a 
dignified basis. It should no longer be the political 
perquisite of the rich, the spoils of campaign con- 
tributors, or a means of personal aggrandizement. 
A great nation should not be the recipient of aid 
from the rich who accept ambassadorial posts. 
The foreign service should not be a caste apart, 
ignorant, by reason of its caste, of the real relation 
of peoples. It should be stripped of its eighteenth- 
century trappings, of the expense and social func- 
tionings which close the service to those best fitted 
for its performance. The salaries of diplomatic 
agents should be sufficient to open the service to 
all classes irrespective of their wealth. 

Diplomacy should be an agency for promoting 
good-will between nations rather than suspicions, 



DEMOCRACY AND THE ROAD TO PEACE 345 

irritations, and hostile feelings. Diplomatic repre- 
sentatives should reflect the opinions and ascertained 
wishes of the nation as a whole rather than the will 
of the class from which the foreign service is usually 
recruited. Diplomacy should have the generous 
quality that Franklin and Jefferson gave to it in 
their missions to France, a quality that has endeared 
the people of the two countries to each other ever 
since. Diplomacy should aim at national rather 
than class relationships; it should frankly reflect the 
democratic quality for which America should stand 
before the world. 

Serious international questions should be placed 
in the hands of specially appointed representatives 
chosen for the particular mission or controversy. 
They should be detailed from the State Depart- 
ment and should be familiar with the traditions of 
the country and the matters in dispute. 

2. Strip the Foreign Investor of His Privileges. 

There should be a severance of the intimacy be- 
tween the foreign office and the overseas investor; 
there should be a divorce between imperialism and 
finance. The merger is too dangerous to the state. 
The investor should stand on his own feet, as he 
does at home. He should take the risks of his in- 
vestments in other lands and bear the consequences. 
The State Department should be closed in his face 
when he seeks its support. 

The doctrine of Lord Palmerston that the flag 



346 DEMOCRACY AND THE ROAD TO PEACE 

follows the investor should be repudiated. The 
government is no collection agency. The rule of 
caveat emptor should apply to the foreign investor 
and concession hunter. He should deal at his own 
risk with foreign nations and weaker peoples. His 
shady investments should not be able to command 
a human sacrifice; his dubious concessions should 
not be backed by the army and the navy. 

Were this doctrine repudiated there would then 
be an end of spheres of financial influence, of protec- 
torates, of colonization for the benefit of the invest- 
ing class; there would be less demand for inter- 
vention, for the protection of private property. 
The sovereignty of the state would end with its 
boundaries. 

Such a policy would reduce the cry for armaments, 
for navalism on the part of the privileged classes, 
a demand born of the doctrine that the nation is a 
debt-enforcing agency. Then the clamor of the 
press, owned and influenced by the investing class, 
would be stilled, and its voice would be free to join 
in the movement for peace. 

So long as the doctrine is accepted that the for- 
eign office, with the army and navy at its back, is a 
proper means for enforcing private contracts, so 
long will the plea for naval preparedness be justi- 
fied. Protection to overseas investments follows as 
a natural corollary to this doctrine. And when a 
controversy does arise with some weaker power 



DEMOCRACY AND THE ROAD TO PEACE 347 

conditions are such that the government is unable 
to secure accurate information, for disorder or 
revolution usually obtains. The channels of in- 
formation are closed. The sources of publicity are 
influenced by the clamor of the investor and the 
press. This was true of the despatches from Mexico 
during the early days of the present administration. 
They were designed to promote intervention. The 
Spanish-American War was promoted by certain 
sections of the press which manufactured informa- 
tion to suit its own desires. Only by a declaration 
of policy in advance that the State Department 
will not be used to support private claimants, in- 
vestors, and concession seekers in foreign lands can 
the government keep itself free from such en- 
tanglements as have been described in the preced- 
ing chapters. Such was the policy adopted by 
President Wilson in the early days of his adminis- 
tration. It kept us out of trouble in Central Amer- 
ica; it saved us from being involved in China. 

3. End the Profits of the Financial Classes. 

There should be no profit from war. War should 
call for universal sacrifice, not sacrifice by the many 
and pecuniary profit by the few. 

War loans should be raised by popular subscrip- 
tions. The government should be its own financial 
agent. It should do its own bond merchandising. 
Securities should be offered in small denominations, 
through the post-office and other agencies. What- 



348 DEMOCRACY AND THE ROAD TO PEACE 

ever profit is to be made should be saved to the gov- 
ernment, or be enjoyed by the ultimate investor, 
who now buys through the banks, financial institu- 
tions, and brokers. 

It is a dangerous thing for the government to be 
in close alliance with the banking institutions, as our 
own experience after the Civil War demonstrates. 
It required fifty years to free the Treasury Depart- 
ment from financial influences that intrenched them- 
selves during these years. 

4. Government Ownership of Munition Plants. 

There should be no class enriched by the making 
of munitions. There should be no incentive to any 
group to promote armaments, war scares, or prepa- 
ration for war. There should be no lingering ques- 
tion in any minds of the subconscious influence of 
expected profits from its continuance. In time of 
war, the government should commandeer every 
shipyard, every powder factory, every shop for the 
making of guns, equipment, or munitions. During 
periods of peace the government should manufac- 
ture its own munitions and build its own battle- 
ships. The experience of Germany, England, and 
the United States offers convincing proof that 
patriotism loses its sacredness in the minds of many 
men when faced with the possibility of profit, and 
that the press is too easily influenced to accelerate 
public opinion when the panoply of patriotism can 
be thrown over the clamor for preparedness 



DEMOCRACY AND THE ROAD TO PEACE 349 

Secrecy is of the first importance in such matters, 
and there is too great temptation to private battle- 
ship builders and munition makers to trade in secret 
information gained from government plans. The 
discoveries of the war office should be the exclusive 
possession of the government. They should not be 
open to private trading and dollar diplomacy, as was 
the case during a recent administration at Wash- 
ington. Officers of the army and navy should not 
be permitted to pass back and forth from govern- 
ment to private service; they should not be permitted 
to enjoy patent rights in munitions and supplies pur- 
chased by the government, as has been the case at 
Washington. These evils would be avoided by the 
government manufacture of munitions. 

5. End the Munitions Trust and the Munitions Lobby. 

The munition makers are in effect a monopoly. 
In peace times they are an international monopoly. 
They make colossal profits. European war orders 
have added $1,000,000,000 to the value of the se- 
curities of corporations in the United States en- 
gaged in the manufacture of munitions and war 
supplies. There is no competition in contracts. 
The government has to pay the price demanded. 
Investigations at Washington have shown that the 
profits enjoyed by munition makers in recent years 
above the reasonable cost of production run into 
the tens of millions of dollars. 

But the savings of millions of the public money 



350 DEMOCRACY AND THE ROAD TO PEACE 

is of relatively small importance in comparison with 
other gains. Public ownership of munition plants 
would end the rich contracts which invite the muni- 
tion lobby; it would free us from the suspicion that 
the agitation for armaments and preparedness is 
promoted and financed by the munition interests. 
For the munition makers of all countries are in- 
fluential with the press. Any one familiar with 
the contributions of the big corporations "to ac- 
celerate public opinion" knows the extent to which 
business will go in the promotion of its interests 
when lured by colossal profits. 

Disclosures in Germany, England, and Japan 
show that the munition makers own newspapers. 
They maintain expensive lobbies. Their stockhold- 
ers stand high in parliaments, Reichstags and min- 
istries. They promote war scares. They induce 
governments to scrap battleships and engines of 
war to bring about the purchase of new and bigger 
ones. They are largely responsible for the burdens 
of preparedness and the increase in war and naval 
appropriations that have been going on for the 
past twenty years. 

Anything so serious as preparedness for defense 
should be free from the suspicion that it is being 
urged for profit. There should be no gain in the 
making of munitions. It should be a government 
monopoly, if for no other reason than to free the 
discussion from the suspicion that some classes 



DEMOCRACY AND THE ROAD TO PEACE 351 

are expecting gains from the sacrifice of other 
classes. 

6. A Citizen Army. 

There should be no military caste in a democ- 
racy; no large group identified with war, and wait- 
ing for an opportunity to display its powers and 
advance its profession. An army educated to war, 
thinking of war, preparing for war, always has been 
a menace to peace. It cannot be otherwise. No 
class was ever trained to a profession that did not 
desire to use the training in which it had been pre- 
pared. This is a law of our being. 

Every profession magnifies its own importance. 
The army and the navy respond to a universal 
principle. They become a powerful, invisible, un- 
conscious lobby for more and more expenditure, for 
more and more men, for more and more engines of 
destruction. As a class they are detached from life, 
from the whole world that makes for peaceful prog- 
ress. 

Aside from such work as the building of the 
Panama Canal, the Alaskan Railway, and the 
many scientific activities with which the officers 
of the army and navy are identified, our expendi- 
ture for protection is a waste. The army and navy 
cost us $250,000,000 a year. Enlisted men are 
taught no trade or calling. They have more leisure 
than is good for them. They cannot marry, can 
have no home except the barracks, and when the 



352 DEMOCRACY AND THE ROAD TO PEACE 

term of enlistment is over they are cast back into 
the army of untrained, unskilled men who have 
given the best years of their life to the nation. 

7. Create an Army of Skilled Workers. 

Many of the evils of militarism can be avoided 
by the creation of an industrial army employed in 
public undertakings now performed by private con- 
tract. The army should be used for the construc- 
tion of river and harbor improvements, coast de- 
fenses, the Alaskan Railway, the Panama Canal; 
they can be employed in government workshops, 
arsenals, armor plants, and navy yards; in the 
production of munitions of war, the building of 
battleships, the manufacture of armor-plate, struc- 
tural steel, and army supplies. When so employed 
they should be paid the regular wages of their craft. 

Such industrial work need not interfere with mili- 
tary training. In fact it will greatly improve it. 
A soldier can be trained to the ordinary duties of 
war in a few months' time. But the real work of the 
soldier has become mechanical. It involves the 
manning, care, and repair of guns and munitions; 
the building and repair of roadways and bridges; 
the handling of supplies; the digging of trenches; 
and the maintaining of sanitary conditions. The 
soldier of to-day is a mechanician, and his efficiency 
is in direct proportion to his mechanical skill. The 
mere military qualifications of a generation ago are 
a thing of the past. 



DEMOCRACY AND THE ROAD TO PEACE 353 

We need at all times from 200,000 to 300,000 
skilled men in the United States. The munition 
shops should be training-schools for skilled me- 
chanics. They would cost but little more than 
vocational schools. It has been estimated that a 
trade training adds from $7,000 to $10,000 to the 
industrial value of the individual worker. 

The enlisted man should be given a vocational 
education. He should be encouraged to take ex- 
aminations and pass from the rank of private to 
that of non-commissioned officer, and at the end of 
a certain period should be permitted to take ex- 
aminations for admission to West Point and An- 
napolis. No position should be closed to him. Every 
soldier, as was said of the soldiers of Napoleon, 
should feel that he carries a marshal's baton in his 
knapsack. Under such an organization the army 
would be truly democratic. Officers prepared by 
trade training and graduating from the ranks into 
West Point and Annapolis would be far better 
officers than those whose knowledge is limited to 
four years of schooling. If real efficiency is desired 
for the army and navy it will be best secured in 
this way. The secret of Napoleon's army was its 
democratic quality. There is little caste to-day in 
the French army. The army of Switzerland is or- 
ganized on a democratic basis. Men who offer their 
lives for their country should do it under the most 
equal terms possible. Even aside from other rea- 



354 DEMOCRACY AND THE ROAD TO PEACE 

sons, this is the road to real efficiency, to the bring- 
ing out of talent and resourcefulness. 

The officers of the army and navy should form 
the scientific arm of the government. They should 
be teachers in the military and vocational schools 
attached to the army and the navy. They should 
have charge of the workshops. They should be as- 
signed to scientific research, to the promotion of 
the arts and sciences. Advancement should be 
by reason of contributions to peace, rather than 
through the building of more battleships and the 
enlistment of more regiments. The esprit de corps 
and devotion to ideals shown by these branches of 
the government should be dedicated to prepared- 
ness for peace rather than war. 

By such a programme we should save much of 
the waste of our $250,000,000 appropriations. We 
should free the nation from the monopoly of the 
munitions trust and the steel trust. Better hours 
and a higher standard of living would be insured to 
the men, who would not be thrown upon the street 
at the end of their enlistment period, unfitted for 
any calling, as they are to-day. The army would 
no longer be an army of waste, it would no longer 
be a caste apart. It would become part of the life 
of the nation, merged with our common interests, 
ideals, and needs. 



DEMOCRACY AND THE ROAD TO PEACE 355 

8. War Should Demand Universal Sacrifice. 1 

Finally war should demand equal sacrifice. Equal- 
ity of sacrifice should be the first postulate of those 
who insist on preparedness. As to this there should 
be no question or dispute. 

The privileged classes, however, seek to shift the 
cost of war and preparedness for war onto the poor. 
We are now being asked to expend $2,000,000,000 
for preparedness and the taxes proposed are in- 
direct consumption taxes that bear no relation to 
equality. These are to be added to the present 
customs and internal revenue taxes from which 
nearly all of our revenues are now obtained. For 
the fiscal year 1914 we collected $292,320,015 from 
customs and $380,041,000 from internal revenue 
taxes, inclusive of the income and corporation 
taxes. But the direct taxes yielded only $60,- 
000,000 or 9 per cent, of the total collections from 
all sources. The remainder came from taxes on 
consumption. 

Even a moderate concession to justice requires 
that a very much larger proportion of our revenues 
should come from wealth, incomes, and inheritances, 
rather than from the necessities and comforts of 
the poor. The least that should be asked is that 
wealth should share according to its ability in the 
burdens which armament involves. War and prep- 
arations for war should involve equal sacrifice. 

1 Portions of this paragraph have appeared in The Outlook, Decem- 
ber 8, 1915. 



356 DEMOCRACY AND THE ROAD TO PEACE 

Unhappily the tax burden of $610,000,000 from 
customs and excise taxation is only part of the 
burden of indirect taxation. For the customs duties 
not only increase the cost of all imported articles, 
they increase the cost of all articles produced in the 
country behind the protectionist wall. Economists 
estimate that the total burden to the consumer 
from customs duties alone amounts to from $1,500,- 
000,000 to $2,000,000,000 a year. 

Comparison of European and American Budgets. 

Democratic America is even more undemocratic 
in its revenue measures than the autocratic coun- 
tries of Europe. The United States collects ap- 
proximately $3.20 per capita from customs taxes, 
while Germany collects $2.50; Austria-Hungary 
$2.25; France $2.60; Italy $2.00; Russia $0.84; 
and Japan $0.40. In addition the burden of in- 
ternal revenue in the United States, which also falls 
most heavily upon the poor, is about $3.30 per 
capita. Thus the per-capita indirect taxes in the 
United States amount to $6.50 per capita, while 
the newly enacted income tax yields only about 
$0.60 per capita. 

As compared with this showing Great Britain 
[1913-14] collected in peace times the sum of $236,- 
245,000, or $5.40 per capita, from the income tax; 
and England has but 40 per cent, of the population 
of America, and the per-capita wealth and per-capita 
incomes are very much lower than in this country. 



DEMOCRACY AND THE ROAD TO PEACE 357 

In addition she collected $136,795,000, or $3.10 per 
capita, from the inheritance tax or death duties. 
All told, Great Britain taxed wealth, incomes, and 
inheritances to the extent of $380,115,000, and col- 
lected 45 per cent, of her total revenues from these 
sources. In other words, the revenues from wealth, 
incomes, and inheritances in Great Britain were 
over six times the revenue derived from these 
sources in the United States. 

Germany, relies upon the income tax for im- 
perial, state, and city purposes. The exemption 
allowed is $225, and the tax rate is progressive. 
Under the imperial law of 1913 the empire collects 
income taxes varying from 1 per cent, on incomes of 
$225 up to 8 per cent, on incomes over $125,000. 
In Prussia and the Prussian cities the exemption is 
the same, and the rate rises from two-thirds of 1 per 
cent, on $225 to 4 per cent, on incomes over $25,000. 
In 1909, 84.7 per cent, of the Prussian direct taxes 
came from the income tax. In addition the bulk 
of the revenues of the cities comes from the income 
tax, which is added to and collected as part of the 
state system. The combined imperial, state, and 
local taxes sometimes rises as high as 12 per cent, 
to 15 per cent, on large incomes for all purposes. 

The French income tax ranges from 3 per cent, 
to 4 per cent., while on incomes in excess of $1,000 
a progressive surtax is added upon large incomes. 

We have paid little attention to where the bur- 



358 DEMOCRACY AND THE ROAD TO PEACE 

den of taxation falls. It is enough to secure the 
revenues. The incidence of the taxes imposed is 
scarcely considered. Yet justice in taxation is the 
first obligation of the state. That should be the 
most elementary of all principles of politics. The 
state has no right to compel one class to pay for 
the protection, safety, and advantages to another 
class. It certainly has no right to shift the cost 
onto those least able to bear it. Yet that is what 
we have done in America for the past fifty years. 

Even an approach to justice demands that not 
more than half the Federal revenues should be col- 
lected from indirect taxation. The other half should 
be borne by wealth, incomes, and inheritances. The 
wealth of the United States is in the neighborhood 
of $180,000,000,000. And this wealth is very un- 
evenly distributed, as are the incomes. At least 
$3,000,000,000 changes hands through death every 
year. If 50 per cent, of this sum, and this is a large 
estimate, were exempted from inheritance tax, it 
would leave an annual taxable fund of $1,500,- 
000,000; which, if taxed at a moderately progressive 
rate, would yield $150,000,000 a year without 
serious burden to the beneficiaries. Certainly in- 
heritances in excess of $1,000,000 could easily bear 
a tax of 10 per cent, without injustice to the re- 
cipients. 

An additional $150,000,000 could be raised from 
an increase in the tax upon incomes. From these 



DEMOCRACY AND THE ROAD TO PEACE 359 

combined sources $300,000,000 could easily be 
added to our Federal revenues. This would make 
it possible to discontinue the tariff upon sugar; it 
would enable the emergency war taxes to be re- 
pealed, and would approach a proper balancing of 
Federal taxation, so that at least $300,000,000 
would be collected from property rather than from 
the necessities of the poor. Even then the con- 
tribution of the well-to-do classes would be far less 
than in Great Britain and Germany. 

Conclusion. 

These should be the democratic postulates of war 
and preparations for war. They are a recognition 
of the forces that lead to war. They constitute a 
flank attack on privilege, on those who profit by 
war and who refuse to pay their share of its bur- 
dens. They involve an extension of democracy in- 
to foreign relations, into diplomacy, into finance. 
They seek to eliminate the causes of war and by 
so doing prevent its appearance. They are pre- 
cautionary proposals before war and should be 
made standing statutes so that all classes would 
know what to expect. They are obstacles to easy 
war. They offer a kind of peace insurance, of pre- 
cautions against war for any other than purely de- 
fensive purposes. 

With such a programme all classes would be 
identified with peace. There would be no profit to any 
class while universal sacrifice would be demanded. 



360 DEMOCRACY AND THE ROAD TO PEACE 

Then all classes will be impelled to seek peace. 
Then war will be as costly to wealth as it now is to 
labor. Then war will mean only suffering, sacrifice, 
and waste. Then all classes will instinctively turn 
to securing disarmament, to the ending of prepared- 
ness, to some means for the common policing of 
those nations which refuse to join in a federation 
for peace. Then means will be found for the settle- 
ment of such disputes as now embroil the investing 
nations either by a tribunal created for that pur- 
pose or by abandoning the doctrine that the state 
is a collection and insurance agency for its subjects. 

Such a consummation may be too much to hope 
for from the dynastic powers of Europe, but it is a 
democratic ideal to strive for. It is an ideal open to 
accomplishment in the United States and in large 
measure in France and Great Britain as well. 

If twentieth-century wars are economic in their 
origin, if they are the outcome of the revolution 
that has taken place in finance, industry, and trade, 
they can only be ended by the elimination of the 
causes which make for war. That is the method 
of modern science. For so long as the cause re- 
mains the inevitable effects will follow. And war 
will remain the agency of privilege and the inev- 
itable outcome of its ambitions until the powers 
and profits of privilege are taken away. 



INDEX 



INDEX 



Agriculture, Great Britain, p. 37 
Alliances, bases of, p. 46; begin- 
nings of, p. 173 
Arbitration of concessions, p. 329 
Aristocracy, English, incomes of, 

p. 67 
Austria-Hungary, p. 19; land- 
owning aristocracy, p. 39 



B 

Bagdad Railway. See Chapter 
XVI. Menace to Great Brit- 
ain, p. 335 
Banking and credit, p. 69 
Bismarck, p. 54; colonial policies 

of, p. 260 
Boer War, causes of, p. 106 
Budgets, Europe and America, 
p. 356 



C 



Caste, Great Britain, p. 38; in 

Europe, p. 154 
China, loan, pp. 87, 250 
Citizen army, p. 351 
Civil war, effects of, p. 313 
Colonial possessions of Great 
Britain, p. 167; colonial policy 
of France, p. 179; expense of, 
276; of Germany, 281; diffi- 
culties of, 284 
Concessions and monopolies, p. 
97; Turkey, pp. 220, 251; 
profit of, p. 270 



Debts, war, p. 298 

Delcass6, p. 56 

Democracy in France, p. 26; 

policies and privilege, p. 307; 

and peace, p. 339 
Diplomacy, mediaeval survival, 

p. 48; American, p. 49; war 

makers', p. 50; financial, pp. 

83, 86 
Direct taxation and militarism, 

p. 355 
Dollar diplomacy, America, p. 51 
Drink evil, Russia, p. 24 
Duma, Russia, p. 25 



E 



Economic foundations of war, 
p. 161 

Education, Great Britain, p. 16 

Egypt, British policy in, p. 167; 
dual control of, p. 168; ex- 
ploitation, p. 169; British cap- 
ital in, p. 172 

Emancipation peasants, Russia, 
p. 21 



Feudalism, Europe, p. 6; Prus- 
sia, pp. 8, 13; new, pp. 61, 156 

Financial imperialism, pp. 72, 
102, 165; in Persia, p. 110; in 
Turkey, p. 226; in United 
States, p. 320 

Financiers, foreign activities of, 
p. 100 



363 



364 



INDEX 



Foreign affairs, England, p. 52; 
investments, p. 72; politics, 
p. 81; Far East, p. 268 

France, democracy of, p. 26; 
peasant proprietorship in, p. 
42; foreign investments of, 
p. 77; imperialistic mind of, p. 
162; imperialism, p. 176; colo- 
nial possessions, p. 179; Alge- 
ciras Conference, p. 181; open- 
door policy, Morocco, p. 182; 
financial penetration, p. 184. 



psychology of, p. 161; begin 
nings of imperialism, p. 165 
colonial possessions, p. 167 
exploitation of Egypt, p. 170 
Morocco, interests in, p. 180 
in Persia, p. 206; conflicts with 
Germany, pp. 223-234; influ- 
ence in Mediterranean, p. 240 
colonial experiences of, p. 286 
indirect taxation, pp. 291-293 
taxation in, p. 332 



G 

Germany, wars of, pp. 7, 54; 
government of, p. 7; economic 
foundations of aristocracy, p. 
32; foreign investments of, p. 
77; internal development, p. 
93; overseas finance, p. 95; 
navy, campaign for, p. 145; 
ambitions, p. 158; military 
strength, p. 159; contentions 
with England, p. 174; inter- 
ests in Morocco, p. 190; Bag- 
dad Railway, p. 214; financial 
activities in Turkey, p. 217; 
conflicts with Great Britain, 
p. 230; ambitions in Mediter- 
ranean, p. 243; imperialism, 
p. 257; foreign policy, p. 257; 
Samoan question, p. 264; in 
Far East, p. 269; trade fail- 
ures, p. 271; colonial experi- 
ences, p. 279; colonization, 
p. 281 

Great Britain, government of, p. 
14; aristocracy, p. 15; public 
office, p. 16; education, p. 16; 
land system in, p. 34; agri- 
culture, p. 37; Lord Palmers- 
ton, p. 53; land monopoly, p. 
64; foreign investments of, p. 
73; internal development and 
overseas finance, p. 92; muni- 
tion makers, pp. 109-113; 
naval appropriations, p. 144; 



Imperialism, profits of, pp. 62- 
78; motives of, pp. 80, 102; 
cause of international troubles, 
p. 103; financial, beginning of, 
p. 165; in Persia, p. 209; gains 
and losses of, p. 275; for trad- 
ing purposes, p. 288; forces 
making for, p. 301; in the 
United States, p. 316 

Indirect taxation, pp. 290-296; 
in United States, p. 355; in 
Europe and America, p. 357 

Industrial revolution, p. 63 

Interest on war debts, p. 298 

Interlocking banking director- 
ates, p. 94 

Investments, foreign, of France, 
p. 176 

Investor should be stripped of 
support, p. 345 

Iron and steel interests, p. 158 



Junkers, pp. 13, 18, 32. See 
Germany 



K 



Kiaochow, p. 272 



Labor and war, p. 310 

Land, systems of Europe, p. 31; 



INDEX 



365 



Great Britain, p. 34; Austria, 
p. 40; Russia, p. 41; monopoly 
and war, p. 45; in Great Brit- 
ain, p. 64 

M 

Mediterranean, struggle for, pp. 
239, 333 

Militarism, expenditure for, 
United States, p. 135; profits 
of, p. 136; modern, begin- 
ning of, p. 142; and indirect 
taxation, p. 295; cost of, p. 
149 

Monopoly, growth of, p. 68; of 
munition makers, pp. 136-139; 
German, p. 266 

Morocco, conflicting claims in, 
p. 180; Panther incident, p. 
181; financial influences in, p. 
182; occupation of, p. 185; end 
of independence, p. 190; one 
of causes of present war, p. 
192 

Munition makers, overseas fi- 
nance, p. 100; financial power 
of, p. 109; international char- 
acter of, p. 110; activities of, p. 
Ill; capital and profits, p. 113; 
European war orders, p. 116; 
merger of profit and patriot- 
ism, p. 117; patriotism and 
munition makers, p. 119; war 
scares, p. 120; Mulhner scare 
in England, p. 122; defenseless 
peoples and militarism, p. 123; 
promoting militarism at home, 
p. 127; merger with workers, 
p. 128; American peace, dan- 
ger to, p. 130; scrapping proc- 
ess, p. 131; patriotism of mu- 
nition makers, p. 132; monop- 
oly, profits of, p. 136; inter- 
national monopoly, p. 138; 
in the United States, pp. 134, 
317; government ownership of, 
pp. 348, 349 



N 

Naval appropriations, Great 
Britain, p. 144; United States, 
p. 144 

Navy league, Germany, p. 147 



O 

Overpopulation, cause of colo- 
nial expansion, p. 280 

Overseas finance, p. 89; effect on 
internal development, p. 91 



Palmerston, Lord, pp. 53, 84 
Patriotism and munition makers, 

p. 132 
Peace, menace to of munition 

makers, p. 130 
Peasant proprietorship, France, 

p. 42 
Persia, powers in, p. 195 
Preparedness, agitation for, p. 

318 
Press, and foreign policy, p. 57; 

activities of, Morocco, p. 187; 

possibility of, p. 328; and 

democracy, p. 340 
Privilege and taxation, p. 290; 

and war, p. 300; and domestic 

politics, p. 307 
Profits from war, p. 310 
Prussia. See Germany 



R 

Railway activities, Turkey, p. 
218 

Reichstag, p. 9 

Russia, government of, p. 20; 
serfs in, p. 21; exploitation of 
serfs, p. 23; drink evil, p. 24; 
ruling caste in, p. 41; Japan- 
ese War, causes of, p. 106; in- 
fluence in Persia, p. 195 



366 



INDEX 



S 

Samoan question, p. 264 

Scares, war, p. 120 

Secret diplomacy, pp. 47, 57 

Serfs, Russia, p. 21 

Skilled workers, army of, "p. 
352 

South Africa, colonial develop- 
ment, p. 264 

Spheres of influence, p. 98 



U 

United States, diplomacy of, p. 
49; munition makers in, p. 
116; expenditure for militar- 
ism, p. 135; naval appropria- 
tions, p. 144; influences in 
China, p. 252; indirect taxa- 
tion, p. 292; forces making for 
imperialism, p. 301; imperial- 
istic activities in, pp. 316-320 



Taxation in Great Britain, p. 
332 

Trade, object of German imperi- 
alism, p. 257; failures of, p. 
271; German colonial, p. 279 

Turkey. See Chapter XVI 



W 

War, Europe's lords of, p. 29; 
scares, p. 120; budgets for, p. 
149; cost of, p. 154; economic 
forces, p. 158; debts, p. 298; 
causes of, p. 302; and labor, p. 
310; reaction and labor, p. 311 



